What does the term 'Indemnity' refer to?

The term 'indemnity' specifically refers to the obligation to compensate for losses or damages incurred. In the context of insurance, it embodies the principle that the insured should be restored to their original financial condition prior to the loss, making 'to insure and restore to the same financial condition' an essential function of indemnity. This principle ensures that the insured does not profit from an insurance claim but is instead placed back in the same financial state they were in before the loss occurred.

This underscores the concept of indemnity as a protective measure against financial loss. The focus on maintaining the insured's original financial condition is fundamental to the operation of insurance policies, ensuring fair and equitable treatment of policyholders under the contractual terms.