Which of the following is a fundamental purpose of the principle of indemnity?

Question

Quizplus · Accepted Answer

The fundamental purpose of the principle of indemnity is to reduce moral hazard by ensuring that the insured cannot make a profit from their loss. The principle requires that the insured be compensated only for the actual amount of loss incurred, up to the limit of the policy coverage. This helps to prevent fraudulent claims and misrepresentations, as the insured has no incentive to deliberately cause or exaggerate a loss in order to gain financially.

Which of the Following Is a Fundamental Purpose of the Principle