Question

Identify the principle of insurance based on the given information:

1. It governs that an insurance contract compensates you for any damage, loss or injury caused only to the extent of the loss incurred.
2. Insurance contract ensures that the insurer does not make a profit in the event of an incurred loss.

Options

• Utmost good faith

• Insurable interest

• Indemnity

• Mitigation of loss

Answer 1

Indemnity

Explanation:

Indemnity means the insurer pays only the actual financial loss, restoring the insured to the pre‑loss position and preventing any gain from a claim, and compensation equals the extent of loss, not profit.