What Is Indemnity Insurance?

Indemnity insurance is a type of insurance that reimburses the insured for specific unforeseen damages or losses, typically up to the same amount as the loss itself. Insured parties pay premiums to insurance companies in exchange for coverage.

Professionals and business owners often have policies in place to safeguard them in case they are held responsible for a particular incident, like making a wrong decision or engaging in malpractice. Typically, these policies are in the form of a letter of indemnity.

How It Works

Indemnity is a type of insurance that provides compensation for damages or loss. It can also mean being exempt from liability for damages. The insurance company agrees to reimburse the insured for any covered loss in return for the premiums paid.

This insurance is an additional type of liability insurance designed for specific professionals or service providers. These professionals offer advice, expertise, or specialized services. Unlike general liability or other commercial liability insurance, indemnity insurance, also known as professional liability insurance, does not cover claims related to bodily harm or property damage.

safeguards against claims due to negligence or failure to perform, leading to a client’s financial loss or legal issues. If a client experiences a loss, they can file a civil claim. The professional’s indemnity insurance will cover litigation expenses and any court-awarded damages.

Like all insurance types, pays for indemnity claim expenses such as court costs, fees, and settlements. The coverage amount and insurance cost vary based on the agreement and past indemnity claims.


Indemnity is a form of insurance payment for harm or loss. In legal terms, it can also mean being exempt from responsibility for damage. Indemnity is 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.