indemnity
Security or protection against a loss or other financial burden; a contractual agreement where one party promises to compensate the other for damages.
The 'principle of indemnity' is the foundation of insurance: it states that the policyholder should be restored to their pre-loss financial state, but should not profit or make a gain from a disaster.
Word relationships
- compensation: Compensation is a broad term for any payment making up for loss or work, while indemnity is a specific legal guarantee to cover liabilities or damages.
- reimbursement: Reimbursement is paying someone back for money they already spent, whereas indemnity can involve direct payment of damages before the insured pays out of pocket.
- penalty: A penalty is a financial punishment or fine, whereas indemnity is a financial restoration of a loss.
Commonly confused with
- liability: Liability is the legal obligation to pay for damage you caused; indemnity is the protection or payout that covers that obligation.
Word family
- indemnify (verb): To compensate for loss or protect from legal responsibility.
- indemnification (noun): The act of securing against loss or damage.
Collocations
- indemnity clause
- principle of indemnity
- double indemnity
- indemnity payment
Example sentences
- "The principle of indemnity ensures that the policyholder is compensated for their actual loss but cannot profit from the disaster." Insurance Law
Memory hook
Indemnity keeps you 'in-the-money' (financially whole) after a 'damaging' (damnum) event. Indemnity makes you undamaged.
When not to use
Do not use as a synonym for a simple gift or bonus; it is strictly a compensatory payment designed to cover a specific loss.
Fun facts
- The classic 1944 film noir 'Double Indemnity' revolves around an insurance scam involving a rare policy clause that pays double the face value in case of accidental death.
Related words
Explore more words
indemnification, Indemnify, insurance, compensate, reimbursement, damages
Also appears in
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