What does the concept of 'indemnity' in insurance imply?

The concept of 'indemnity' in insurance fundamentally implies the restoration of an insured individual to their previous financial state prior to a loss or damage incurred. This principle ensures that the insured is compensated for their actual loss and does not profit from the insurance coverage. Indemnity aims to achieve fairness in the insurance process, preventing the insured from receiving more than their loss, thus maintaining a balance and promoting trust in the insurance system.

Restoration to the previous financial state means that the insured should be made whole again, effectively returning them to the position they were in before the incident. This cannot involve coverage without limits or full payment of all claims, as those concepts do not adhere to the principle of indemnity, which is about covering actual losses rather than offering unlimited coverage or payments. The priority processing of claims pertains to the manner in which claims are handled but does not relate directly to the essence of indemnity. Thus, the focus on the restoration of financial status is what makes this interpretation of indemnity accurate.