What is Indemnity?

Michael Pollick
Michael Pollick

Indemnity is the legal philosophy upon which the concept of most insurance policies rests. Strictly speaking, it is protection from loss and damage claims filed by another person. For example, the owner of an amusement park may have indemnity insurance to compensate visitors injured on his or her property. The eventual insurance payout would be enough to restore the injured person back to the financial state he or she was in before the accident, but nothing more. Only a legal lawsuit brought against the park owner could result in additional punitive damages. This type of insurance protects the holder from suffering financial loss due to a lawsuit.

Most insurance policies are based on the indemnity concept.
Most insurance policies are based on the indemnity concept.

The principle behind indemnity is a financial restoration to a level just before the accident or injury or illegal act. Most laws concerning civil court actions also use this concept as a measuring stick for damages. If a plaintiff is entitled to compensation for the actions of the defendant, the amount awarded should only bring him or her back to a state of wholeness. Whatever actual losses were suffered would be repaid, but punitive damages would be a separate matter.

Amusement park owners might obtain indemnity insurance in case of injuries.
Amusement park owners might obtain indemnity insurance in case of injuries.

Many people encounter indemnity situations and don't even realize it. Many rental agreements contain an indemnity clause which prevents the customer from suing the rental agency for damages caused by use of the equipment. Leases for apartments may also contain similar clauses, which limit claims against the owners in case of accidents. Whenever a ticket is purchased for a sporting event or concert, part of the condition of admission is an indemnity agreement between the ticketholder and the venue itself. If an errant baseball strikes a fan or a faulty pyrotechnic display burns a concert-goer, the agreement protects the stadium or hall from a major lawsuit.

Wheelchair makers may require hospitals to indemnify them against any accident a patient may have while using their product.
Wheelchair makers may require hospitals to indemnify them against any accident a patient may have while using their product.

Even if the word 'indemnity' is nowhere to be found on a document, there may be an agreement to 'indemnify' another party. This means that you agree not to hold someone else responsible for any accidents or injuries you may suffer while on his or her property. "Swim at your Own Risk" signs at an unguarded swimming pool are indicators of an implied indemnity. If you choose to swim and suffer a head injury from diving, you may not be able to sue the owner of the swimming pool for medical expenses. If you understood the sign's meaning at the time, you agreed to indemnify the owners. Sometimes a claim will hold up in court proceedings, but not always.

Most major touring acts have musician public liability insurance, in addition to an indemnity clause that is included on each ticket to protect the band and the venue.
Most major touring acts have musician public liability insurance, in addition to an indemnity clause that is included on each ticket to protect the band and the venue.
Many rental agreements contain an indemnity clause.
Many rental agreements contain an indemnity clause.
Michael Pollick
Michael Pollick

A regular wiseGEEK contributor, Michael enjoys doing research in order to satisfy his wide-ranging curiosity about a variety of arcane topics. Before becoming a professional writer, Michael worked as an English tutor, poet, voice-over artist, and DJ.

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Discussion Comments


I hurt my back (herniated disk) while doing volunteer work. Am I entitled to an indemnity?


you need to state where you are. laws differ from place to place and state to state.


I was a victim in a road traffic accident where the vehicle i was driving was rear ended by another driver. Because it was the other party's fault, his insurance company admitted full liability and my vehicle has been authorized for repair by the other person's insurance. I was also knocked out in the accident and his insurance has authorized for me to have private physio treatment for my severe whiplash injuries. His insurance company didn't want me to seek independent legal advice and said they would settle compensation for my injuries privately and i have a letter from his insurance accepting full liability and offering physio and also compensation at a later date.

Having thought on it and having a couple of nagging issues, i engaged a no-win, no-fee solicitor and have recently had an email from my solicitor stating that the other insurance is now saying there is an indemnity issue with the offending driver. They would not say what the issue was due to data protection, but it was surmised that there was a possibility that the offending driver (who, i may add, was driving the vehicle for hire) on behalf of his wife had not been paying their insurance premiums.

My issue is that the offending driver's insurance company spoke to me, admitted liability, sent me a letter admitting full liability, authorized our vehicle to be repaired, authorized physio for my severe whiplash injuries, all at their cost, but are now stating there are indemnity issues now i have engaged a solicitor.

Where do i stand? Do i have a lawful claim against the other driver's insurance?


I am an occasional guest at my boyfriend's house: he has a small reservoir on his property that we both have used to kayak and swim in. It used to be a public swimming area, but was closed down 30 years ago and is now owned by his family.

My boyfriend's mother, who I am not on good terms with and who holds the deed, has asked me to sign a handwritten Letter of Indemnity, claiming that it is an insurance requirement. I am very wary of giving her my personal information, but she has threatened to contact police if I do not sign. Is this really a typical/legitimate requirement of homeowners insurance? Should I be concerned about police involvement?


I recently had a furniture cleaning company clean my two sofas - they didn't use the correct chemicals and the dye lifted in the fabric - they have made a claim through their insurance but they only have indemnity insurance.

The insurance company only wanted to pay the value of the sofa at the time of purchase (nine years ago), less a percentage for wear and tear. I was under the impression that they should calculate on the cost of replacement at today's cost less the percentage for depreciation. Please help as I'm getting very frustrated with e-mails back and forth! Kind Regards ST


Please help. I have two separate indemnity accounts of which I am the trustee but are in the names of my kids. I have been told I cannot withdraw on these as they are locked in until children reach 25. I'm in a dire need economic situation. Is there any way around this?


The contract of insurance is a contract of indemnity. This means that the insurer will compensate the insured to the extent of loss suffered by him. Marine or fire insurance are contracts of indemnity as the insurer compensates the insured to the extend of loss suffered by it.


If there is an indemnity financial cap, can i still go to court and sue for my total losses that is above the indemnity financial cap? Can the court award damages above the indemnity financial cap for a breach of contract?


I have a student loan, can the cosigner sue me for indemnity?


I am in the process of selling my house and have been asked by the buyers solicitor to take out indemnity insurance for a single story side extension which was done over five years ago for which, it seems, the local council did not approve the work. Other than the two obvious options i.e. 1. take out indemnity insurance, or 2. tell the buyer to take it or leave it: what other information can you provide in terms of my rights or possible options I can pursue?

Many thanks.


These seems to be the trend of things in the housing market at the moment whereby financial institutions want to protect themselves against any loss, i have also faced a similar circumstance last week i had to pay for the indmnity insurance.



You do not need to pay anything, you do not need to take liability for what you know nothing about, if he wants the property he either accepts as such or he forgets buying your property. It's not lease hold property it's freehold.


Please help! I am selling a freehold end of terrace house which has a small lean to at side of property also a stand alone garage in rear garden. I have owned this home for approx 1 1/2 years, the buyers solicitor is asking me to pay £125 for an indemnity insurance cover as they cannot find planning permssion for this lean to and garage. (this was already there when I bought the property and do not know when it was built) I am not sure if I have to pay this or not - please can you help

Many thanks

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