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The meaning of insurance indemnity and its legal basis

Insurance policies can be very confusing and often seem to be intentionally worded in such a way as to be almost unintelligible to lay people. However the vast majority of homeowners will take out home insurance, many people purchase health and life insurance, and all vehicle owners must acquire insurance before driving on public roads. Therefore it is important to understand key concepts such as insurance indemnity, and the legal basis upon which policies and settlements are calculated.

An insurance indemnity is directly related to the value of any given insurance policy. In short, it is the sum of money that is paid as compensation by an insurance company to a claimant, as a result of losses sustained by the claimant. For example, if a homeowner has chosen to take out a house insurance policy which covers the contents of the house, they may then claim in the event of damages to items within the house. Therefore they can request that their insurance company subsidise the purchase of new carpets or curtains if they are required. The insurance indemnity is the sum that is paid to the claimant under the basis of the insurance policy.

Of course, insurance indemnities vary considerably from policy to policy and from broker to broker. Specific policies may provide cover for specific items within the home and not for others. Generally car insurance policies tend to be more uniform, as it is legally required for drivers on public roads to be insured in this manner. Any queries or questions on the legal basis of insurance indemnity can be answered by HM Revenue and Customs, at hmrc.gov.uk.

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