Insurance is not meant to leave the policyholder better off than before the loss. Indemnity is the principle and the practical result of restoring the insured to the approximate financial position that existed before the covered loss, no more and no less.

Property claims paid at actual cash value reflect indemnity by subtracting depreciation. Replacement-cost coverages modify pure indemnity by paying the cost of new property without deduction for depreciation, subject to policy conditions. Liability payments indemnify the insured against sums owed to third parties.

Valued policies and certain agreed-value arrangements set a predetermined payment and may depart from strict indemnity. Subrogation and salvage rights help the insurer enforce the principle by recovering from responsible parties or residual value. The indemnity concept remains central to the distinction between insurance and wagering.

• Restoration of the insured’s pre-loss financial position
• Core principle of most insurance contracts
• Implemented through valuation and recovery provisions
• Distinguishes insurance from profit-seeking bets