Therefore, the principle of set-off is not strictly followed, as the usual revaluation and depreciation are not taken into account. Indemnification is a contractual agreement between two parties whereby one party agrees to pay for any loss or damage caused by another party. A typical example is an insurance contract in which the insurer or beneficiary agrees to indemnify the other (the insured or the beneficiary of compensation) for damages or losses in return for the premiums paid by the insured to the insurer. With compensation, the insurer compensates the policyholder – that is, it promises to make the person or company complete for any damage covered. Certain types of policies affect the principle of compensation. These are value policies and first-loss insurance. It is our last principle that creates an insurance contract and probably the easiest. It simply means paying an excessive premium with no corresponding benefit. The sum insured should therefore always be based on the actual market value of the insured object at the time of taking out the insurance policy. From all these types of average benefits, it can be seen that if the insurance is not properly taken out on the full value insurance, that is, if there is underinsurance, the insured will not receive full compensation. The amount of compensation is directly proportional to the damage suffered. The insurance company pays up to the amount of damage suffered or the sum insured agreed in the contract, whichever is lower.
For example, if your car is used at $10,000, but the damage is only $3,000. You will not receive $3,000 of the total amount. However, if you are underinsured – since you have not acquired an insurance limit high enough to be completely « cured » – this principle still applies because you do not benefit from your insurance policy. The principle of compensation stipulates that an insurance contract will compensate you for damages, losses or injuries caused only to the extent of the damage suffered. The insurance contract guarantees that the insurer does not make a profit in the event of damage. If an insured has purchased a $50,000 insurance limit for their car and has been involved in an accident. After taking it to a certified body shop, the mechanic estimates it would cost $10,000 to repair the damage and restore the car to its original condition. In this case, under the principle of indemnification, the insured would only be entitled to an indemnity of $10,000 (or « indemnity ») from the insurer, as this is necessary to restore his financial situation before the loss. No more, no less. Just because they bought $50,000 in insurance does not mean they will receive $50,000 in compensation every time.
Payment is made by the insurance company on the basis of the actual amount of damage suffered. To put it much better, insurers will therefore try to bring the insured back to the same financial situation as he occupied immediately before the damage, only if the insurance is correctly oriented towards full value insurance. Indemnification is a comprehensive form of insurance compensation for damage or loss and may also refer to an exemption from liability for damages in the legal sense. Liability insurance is a way for a business (or individual) to gain protection against claims. This insurance protects the holder against the obligation to pay the full amount of compensation, even if he is responsible for the cause of compensation. This principle ensures that the policyholder receives an amount of benefits corresponding to his actual losses, so that he does not benefit from it. For this reason, it is linked to another central principle of insurance, that of insurable interest, since the policyholder cannot receive an amount beyond his insurable interest. The principle of compensation provides that in the event of damage, the insured returns to the same financial situation as it was immediately before the loss. For example, if you suffer a loss to your home due to a fire and it is estimated that it would cost $50,000 to repair the damage, you will get it from the insurance company that is subject to the limits of the insurance chosen and other conditions of the insurance policy. Liability insurance is an additional form of liability insurance specific to certain professionals or service providers.
Insurance professionals offer advice, expertise or specialized services. Also known as professional liability insurance, liability insurance has nothing to do with general liability insurance or other forms of commercial liability insurance that protect businesses from bodily injury or property damage. Paying someone means « making someone whole. » The principle of compensation is one of the basic principles of insurance, as it is the part of an insurance contract that guarantees that the insured is entitled to compensation and sets limits on the amount he can receive. [Fact in brief: The word reparation comes from the Latin root indemnifies, which means unharmed, intact or without loss.] If you are able to understand these 7 principles, you will get the tools you need to defend your rights, liability insurance protects against claims arising from possible negligence or non-performance resulting in financial loss or legal involvement of a client. A customer who suffers a loss can file a civil suit. In response, the professional`s liability insurance covers legal costs as well as damages awarded by the court.