Insurance can be broken down into two groups, indemnity and non-indemnity.ย For example, property insurance is indemnity insurance while life insurance is non-indemnity insurance.
Indemnity means that the insured is entitled to a specific amount of compensation for a loss that is tied to a replacement, reimbursement, or fair-market value. The primary difference is that with indemnity insurance, there is no “profit” so to speak.
Non-indemnity insurance tends to cover things with no real replacement value. The amount of compensation received cannot be directly correlated with the loss.ย For example, life insurance is non-indemnity insurance because you cannot place a value or a cost of replacement on a person’s life.
