The concept that one should not profit from the payment provided by an insurance policy is known as?

• A. Indemnity
• B. Insurable Interest
• C. Subrogation
• D. Utmost Good Faith

Answer: (A)

The concept being tested is indemnity: insurance is meant to restore the insured to the financial position they held before the loss, not to provide a profit from the payment. This means compensation should equal the actual loss (subject to policy limits, deductibles, and coinsurance), so the insured isn’t better off because of the claim.

Insurable interest is about having a legitimate stake in the thing insured, not about profit from claims. Subrogation is the insurer's right to recover amounts from a third party after paying the claim. Utmost good faith refers to the duty of both parties to deal honestly and disclose relevant information. None of these describe the idea of avoiding profit from the claim in the way indemnity does.