Principle of Indemnity:

1. Indemnity means a guarantee or assurance to put the insured in the same position in which he was immediately prior to the happening of the uncertain event. The insurer undertakes to make good the loss.

2. It is applicable to all classes of insurance.

3. Under this principle the insurer agrees to compensate the insured for the actual loss suffered.

Indemnity means security, protection and compensation given against damage, loss or injury.

An insurance contract is not made for making profit, its sole purpose is to give compensation in case of any damage or loss. The amount of compensation paid is in proportion to the incurred loss.

However, in the case of life insurance, the principle of indemnity does not apply because the value of human life cannot be measured in terms of money.