What Is Indemnity?
Indemnity is the core principle that insurance restores you to the financial position you were in before a loss — no better, no worse. A health indemnity plan pays a fixed amount per day in the hospital rather than the actual bill; a property policy aims to make you whole on the damaged item’s value, not hand you a profit.
Why it matters
The indemnity principle is why "actual cash value" pays depreciated value, not replacement cost, unless you bought that upgrade.
Common confusion
Indemnity does not mean "full replacement no matter what" — it means "back to where you were," which depreciation can reduce.
Frequently Asked Questions
What is an indemnity health plan?
It pays a set benefit per service or day, letting you choose any provider, unlike an HMO/PPO network plan.
Why won’t my insurer pay the full replacement cost?
Unless you carry replacement-cost coverage, the indemnity principle limits payment to actual cash value (depreciated).