The principle of indemnity is one of the three main legal principles that apply to almost all insurance policies. Insurance policies are designed to transfer the risk exposures an entity faces to an insurance carrier. The principle of indemnity governs these contracts by not allowing an insured’s proceeds to exceed its financial losses from an insured event. Insurance pays the actual value of the loss and should not allow an insured to gain more than what was lost.

The principle of indemnity also requires that insureds have an insurable interest in the subject of the insurance policy. To have an insurable interest, the entity must suffer a financial loss if an insured event were to occur.

The principle of indemnity is the reason that insureds cannot have duplicate coverage. Almost all insurance policies have ‘other insurance’ clauses that limit or deny coverage for an otherwise covered loss if it is covered by another policy.

If you have any questions about the principle of indemnity and how it applies to the insurance policies or claims of your landscaping business, please fell free to contact one of our licensed insurance agents.

The Agent Articles section of BearWiseLandscapers.com allows our insurance agents to provide practical information for landscapers. These agents can also obtain quotes and establish a custom insurance program for your landscaping business through our access to a variety of insurance carriers. This agent article is filed under (1) Insurance, and you can follow comments to it through the RSS 2.0 feed. Feel free to leave your own response below: