What is Indemnity in Insurance and the Law?

Indemnity is a type of insurance that provides full compensation for damage or loss. In legal terms, it can also mean being exempt from liability for damage.

It’s a legal agreement between two parties. Under this agreement, one party agrees to cover any potential losses or damages.

An insurance contract is a common example where one party, either the insurer or the indemnitor, agrees to compensate the other party, the insured or indemnitee, for any damages or losses. This compensation is provided in exchange for the premiums paid by the insured to the insurer. In the case of indemnity, the insurer promises to fully compensate the policyholder, whether an individual or a business, for any losses covered by the contract.

How It Works

Most insurance agreements include an indemnity clause, which is a standard provision. However, the coverage and extent of the indemnity clause vary depending on the specific agreement.

An indemnity agreement includes a period of its, which is the duration the payment is valid. Contracts often have a letter of indemnity to ensure both parties follow the contract terms, or else pay indemnity.

It’s often included in contracts between a person and a company, such as when getting car insurance. It can also be seen in larger agreements between businesses and the government, or between different countries.


Indemnity is a form of insurance payment for harm or loss. In legal terms, it can also mean being exempt from responsibility for damage. It’s a contract between two parties where one party agrees to cover potential losses or damage caused by the other party. Usually, an insurance agreement states that the insurer, also called the indemnitor, will reimburse the other party involved (the insured or indemnitee) for any losses or damage in exchange for premiums paid by the insured.