Indemnity principle

The indemnity principle means that insurance for loss should restore the insured, as far as money can, to the position before the insured event, without creating a gain. It underlies valuation, underinsurance and overinsurance, deductibles, salvage, subrogation and contribution between insurers. In Switzerland it is central to indemnity insurance, especially property and liability cover. It does not operate in the same way for fixed-sum insurance, such as many life or accident policies, where the agreed sum is payable upon the insured event.