The principle that ensures claims are settled without allowing the insured to profit from the settlement is called?

• A. Indemnity
• B. Subrogation
• C. Insurable Interest
• D. Consideration

Answer: (A)

Indemnity means the insurer aims to restore the insured to the financial position they had before the loss, not to allow any profit from the claim. The payout should match the actual loss (taking into account factors like deductibles, depreciation, or salvage value), so you cannot gain financially from an insurance settlement. This principle helps prevent moral hazard and ensures fair compensation. For contrast, subrogation involves the insurer stepping into the insured’s shoes to recover losses from a third party after paying the claim; insurable interest requires the insured to have a stake in the insured property or person at the time of loss; and consideration refers to the exchange of value—premium for the promise to pay—which supports the contract.