The principle of indemnity is a legal principle that limits the payment of damages for a loss to the actual amount of loss suffered.
In a loss, the insurer must compensate the insured for the actual loss sustained.
The compensation must not surpass the actual amount of loss.
This principle states that a person should not be able to gain from a disaster, but he should not be allowed to lose from it either.
Final answer:
Principle of indemnity :
The principle of indemnity is a concept in insurance that states that the amount paid by the insurer should not be more than the actual loss suffered.
It only applies to property or liability insurance policies.
It means that the policyholder must suffer an actual loss and cannot recover anticipated profits that may have been lost due to an insured peril.