Indemnity insurance is a term that is used to indicate a type of insurance policy that allows policyholders to receive reimbursements from their insurance providers for certain unforeseen losses or damages incurred by them. Before we proceed with the concept of indemnity insurance, it is crucial that we have a firm grasp of the concept of insurance. Now, insurance is a term that is used to indicate an arrangement between two parties where one party agrees to compensate the other for the occurrence of an uncertain and unanticipated event in exchange for periodic payments made to them. The party that makes the ultimate payment is known as the insurance provider and the party that makes the periodic payments towards their arrangement is known as the holder of the insurance policy.
In simple terms, an insurance policy protects the holder of the policy from unexpected monetary burdens. This protection is offered by insurance providers in exchange for recurring payments made to them by the holder of the policy.
On comprehending the essential meaning of insurance, it automatically becomes easier to understand the concept of an indemnity insurance. Indemnity insurance policies are practically designed to safeguard professionals and proprietors against damages that may be incurred in various business transactions. Indemnity insurance policies are most suited for professionals that may be found to be at fault in the event of any misconduct or mismanagement. Such insurance policies are popularly purchased by individuals that are professionally involved in financial services, legal work, and medical practices.
Indemnity insurance has become progressively prominent when it comes to the real estate industry. Such insurance policies are seen to be an excellent means to mitigate the risks involved in real estate transactions.
It has been observed that the parties involved in real estate transactions hardly ever agree on the same terms with respect to warranties and compensations. In such situations, the buyer generally seeks the maximum possible protection while the seller looks to curb its liabilities. Such encounters have the potential of frustrating the entire sale. However, this is where indemnity insurance plays an important part. Employing an indemnity insurance can effectively iron out any such conflicts. It provides absolute protection to the policy holder in the event of a violation of a warranty.
Indemnity insurance is a derivative form of liability insurance with special reference to professionals and business owners.
