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 Indemnity –

The principle of indemnity means that the loss, and only

the loss, is compensated. Insurer has to indemnify (i.e.

promise to pay for the financial loss suffered by) the

insured. At the same time, the insured should not be paid

anything more than the financial loss suffered by him. In

other words, the insured should not be able to make a

profit out of the loss suffered. The insurance contract is for

compensating the person who experiences a loss so that he

is brought back to the same financial position as before the

loss. The insurance policy indemnifies or guarantees

compensation only for the amount of loss as anticipated

and insured and for nothing more. One should note that

insurance policies have a designated sum insured, which

indicates the total value of the risk that is taken over by

the insurer through the policy.

 Subrogation –

The insured’s right to claim from anywhere else is taken

over by the insurer when he pays a claim. Since the insurer

has paid the amount of loss to the insured, the insurer

would be the one who has borne the loss. Hence, the name

of the insurer should be substituted for the insured and the

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