What is the main promise of indemnity in an insurance contract?

The main promise of indemnity in an insurance contract is to restore the insured to their pre-loss position. Indemnity is a fundamental principle in insurance that ensures the insured is compensated for a loss to the extent of their financial interest in the insured property or risk, without profiting from the loss. This means that if a loss occurs, the insurer will provide compensation that allows the insured to recover from that loss and return to their previous financial position, thus preventing any unjust enrichment.

By adhering to this principle, insurance maintains its role as a risk management tool rather than a financial windfall. The focus is on the financial restoration rather than complete replacement or covering all incidental expenses that might arise due to a loss. The essence of indemnity ensures that the insured does not gain more than what was lost, fostering fairness in the insurance process.