Page 5 - Life Assurance
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Principle of Indemnity
The principle of indemnity states that a
person may not collect more than the actual loss
in the event of damage caused by an insured
peril.
Thus, while a person may have purchased
coverage in excess of the value of the property, that
person cannot make a profit by collecting more than
the actual loss if the property destroyed.
Many insurance practices result from this
important principle.
The purpose of the principle of indemnity is
to prevent the insured from taking out
duplicating policies with different insurers in the
expectation of recovering more than the actual
loss.
Typically, such clauses provide that all
policies covering the same risk will share pro rata in
the loss.
Though the principle of indemnity is
primarily associated with property insurance
some authorities claim it applies to life
46 Life31/life/life 08
Principle of Indemnity
The principle of indemnity states that a
person may not collect more than the actual loss
in the event of damage caused by an insured
peril.
Thus, while a person may have purchased
coverage in excess of the value of the property, that
person cannot make a profit by collecting more than
the actual loss if the property destroyed.
Many insurance practices result from this
important principle.
The purpose of the principle of indemnity is
to prevent the insured from taking out
duplicating policies with different insurers in the
expectation of recovering more than the actual
loss.
Typically, such clauses provide that all
policies covering the same risk will share pro rata in
the loss.
Though the principle of indemnity is
primarily associated with property insurance
some authorities claim it applies to life
46 Life31/life/life 08
