Is Life Insurance A Contract Of Indemnity? Explained

Is Life Insurance A Contract Of Indemnity?

What is a Contract of Indemnity?

It is an agreement where one party promises to compensate the other for any loss or damage incurred. In indemnity insurance, the insured is restored to the same financial position they were in prior to the loss. Examples include health insurance, car insurance, and property insurance.

When indemnity is a part of insurance, these are the features you may come across.

Compensation for loss

Requirement for proof of loss

Restoration of the insured to their pre-loss financial state

Why Life Insurance is Not a Contract of Indemnity

So, is life insurance a contract of indemnity? No. Life insurance, unlike indemnity insurance, does not aim to restore the policyholder to their original financial state after a loss. Instead, it provides a predetermined sum of money to beneficiaries upon the policyholder's death. Instead of indemnity, human life value in insurance policies offering life cover is what determines the sum assured value, benefits, and other factors.

Here are the features offered by life insurance.

Fixed sum assured

Payout via a death benefit needing no proof of financial loss

Designed to provide financial security and support to the policyholder's dependents

A life insurance plan is a contract between the policyholder and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the death of the insured person. It serves as a financial safeguard for families, ensuring they are protected from financial hardships in the event of the policyholder's death.

A life insurance calculator is a helpful tool that can assist individuals in determining the appropriate amount of coverage needed based on their financial situation and future needs.

The answer to the question, "Is life insurance a contract of indemnity?", is a ‘No’. The predetermined payout structure of life insurance does not align with the principles of indemnity insurance (which is based on actual financial loss compensation).

Life insurance provides a fixed sum to beneficiaries, usually based on human life value in insurance, irrespective of the actual financial loss incurred. It is designed to offer financial security and peace of mind rather than indemnifying the policyholder for a specific loss.

IndiaFirst Life Guaranteed Protection Plus Plan

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IndiaFirst Life Plan

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Dropdown Field: Tax Saving
Product Description: A protection plan for your family that helps them stand independently! IndiaFirst Life Plan gives your family a financial cushion to fall back on in your absence.
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IndiaFirst Life Radiance Smart Invest Plan

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Dropdown Field: Investment
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Life cover charges returned at the end of policy year
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IndiaFirst Life Guarantee of Life Dreams Plan

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Indiafirst Life Guaranteed Single Premium Plan

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IndiaFirst Life Guaranteed Pension Plan

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Dropdown Field: Retirement
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Is Life Insurance A Contract Of Indemnity?

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IndiaFirst Life Guaranteed Protection Plus Plan

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IndiaFirst Life Radiance Smart Invest Plan

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IndiaFirst Life Guarantee of Life Dreams Plan

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Indiafirst Life Guaranteed Single Premium Plan

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IndiaFirst Life Guaranteed Pension Plan

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