Business Studies

State the following statement is True or False:
The principle of insurance under which the compensation paid to the insured which is equal to the actual loss is indemnity.


Answer & Solution

True


SOLUTION
According to the concept of indemnity, the insurer undertakes to put the insured, in the event of loss, in the same position that he occupied immediately before the happening of the uncertain event. In other words the insurer undertakes to compensate the insured for the loss caused to him/her due to damage or destruction of property insured. 
The compensation payable and the loss suffered are to be measured in terms of money. The principle of indemnity is not applicable to life insurance.
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