What is indemnity in insurance?
Indemnity (compensation) is the principle of providing financial compensation to policyholders or insurance company customers in accordance with the losses suffered.
In essence, the principle of indemnity aims to return the insured party to the same condition financially before suffering a loss, so that payment of claims by the insurance company must not exceed the loss limit. example: The coverage limit owned by a client or customer of an insurance company is $ 50,000 but because the loss is only worth $ 10,000, the insurance company is only obliged to pay a claim of $ 10,000.
Payment Methods of Indemnity
When a valid claim arises, the insurance company can use four payment methods as follows:
1. Cash Payment
Cash payment is the most widely used payment method by insurance companies in providing compensation for losses suffered by customers. such as hospital medical expenses, fires, natural disasters, car damage etc.
2. Repair
Insurance companies often also provide compensation in the form of (car) repairs, where the damage will be repaired at an authorized repair shop that has been appointed by the insurance company.
3. Replacement
Replacement is often done by insurance companies in solving claims problems, for example replacing broken glass in a house.
4. Reinstatement
Reinstatement is often used as an indemnity in the case of property in the form of buildings, machinery and equipment. In this reinstatement method, the insurance company repairs or builds property or machinery damaged by the disaster.
Indemnity (compensation) is the principle of providing financial compensation to policyholders or insurance company customers in accordance with the losses suffered.
In essence, the principle of indemnity aims to return the insured party to the same condition financially before suffering a loss, so that payment of claims by the insurance company must not exceed the loss limit. example: The coverage limit owned by a client or customer of an insurance company is $ 50,000 but because the loss is only worth $ 10,000, the insurance company is only obliged to pay a claim of $ 10,000.
Payment Methods of Indemnity
When a valid claim arises, the insurance company can use four payment methods as follows:
1. Cash Payment
Cash payment is the most widely used payment method by insurance companies in providing compensation for losses suffered by customers. such as hospital medical expenses, fires, natural disasters, car damage etc.
2. Repair
Insurance companies often also provide compensation in the form of (car) repairs, where the damage will be repaired at an authorized repair shop that has been appointed by the insurance company.
3. Replacement
Replacement is often done by insurance companies in solving claims problems, for example replacing broken glass in a house.
4. Reinstatement
Reinstatement is often used as an indemnity in the case of property in the form of buildings, machinery and equipment. In this reinstatement method, the insurance company repairs or builds property or machinery damaged by the disaster.
