Just what is Indemnity?

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All of us have some kind of insurance be it for your home, your car, your business or yourself. All insurance contracts, without exception, are governed by a set of fundamental principles otherwise known as the principles of insurance. These include Utmost Good Faith, Insurable Interest, Indemnity, Subjugation, Contribution and Proximate cause. We will get to all of these over the next few months on this blog, but for now let us explore indemnity.

All insurance contracts are contracts of indemnity i.e., the amount which is payable to you in the event of you experiencing a loss against which you are covered is limited to the extent of your pecuniary or financial loss or injuries sustained at the time of the loss. When a loss does occur, the amount that you may recover is called the ‘measure of indemnity’.

The reason that you pay a premium to your insurers is that if a loss does occur, they will return you to the same position financially that you were in immediately before whatever happened, happened. You are put back on track without incurring any financial loss or making any financial gain.

But beware! Like all things in life, it’s not as straight forward as it may at first sound. There are a few factors that you must take into account;

  1. You may only ever claim for the material loss sustained, not for any sentimental or consequential losses.
  2. You can only claim for the amount of damage incurred, you may not claim for a total loss on a policy if this is not the case.
  3. Once you have been restored to the position you were in before the loss, you must transfer all your rights against any third parties to your insurers.
  4. You may not recover a loss more than once on various policies you may hold.
  5. IMPORTANT. Your indemnity is subject to the limit of your sums insured.
  6. The amount of the payment may depend on the adequacy of the amount of insurance cover you originally purchased.

Some pointers:

1. A value at risk survey will check your sums insured for adequacy.

2. Once you know your sums insured – check the market for quotes.

3. Check the press for details of how your insurers are treating claims, more publicity in this area is not a good sign.

Being educated as to your policy and its limitations and taking timely corrective action where there are inaccuracies will give you the best possible insurance cover. Indemnity.ie is here to help you with weekly articles relating to your insurance queries.