Indemnity Auto Insurance: Simply Explained (2023)
The indemnity insurance meaning is defined as the compensation paid by one person or party to another for losses sustained in an accident. If you are found to be at fault for an accident, your insurance provider will be responsible for paying out the indemnity and you may see an increase in your auto insurance rates because of it.
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Travis Thompson
Licensed Insurance Agent
Travis Thompson has been a licensed insurance agent for nearly five years. After obtaining his life and health insurance licenses, he began working for Symmetry Financial Group as a State Licensed Field Underwriter. In this position, he learned the coverage options and limits surrounding mortgage protection. He advised clients on the coverage needed to protect them in the event of a death, critica...
Licensed Insurance Agent
UPDATED: Nov 8, 2023
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Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Nov 8, 2023
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider.
Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
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In general terms indemnity is compensation paid by one party to another party in respect of a particular loss sustained by the receiving party. The indemnitor (the party who pays the compensation) does not have to be responsible for the loss of the other party though they may be. There are many different forms that indemnity can take including repairs of damage, replacement of items, and reinstatement of service and cash payments.
In legal terms indemnity has a broad meaning which is that an indemnity is intended to make an individual party to a contract “whole” again if a specific contractual event should take place. Though the event is clearly explained in the contract the actions taken to make the contract “whole” are usually factually understood and unknown to the different parties of the contract until that event takes place – and maximum liability for indemnity is usually specified under the contract. An indemnity is not considered to be the same as a guarantee under law even though it may appear to be similar.
In insurance terms indemnity is where the insurer undertakes the responsibility through an insurance contract to make the insured party “whole” again.
What does indemnity mean in terms of Auto Insurance?
In the case of a vehicle insurance policy, the insurer may carry an obligation of indemnification. In this instance where a policy holder is involved in an accident and that accident is clearly their fault the insurance carrier is obliged to indemnify their driver for very specific circumstances to ensure that they are “whole” again.
In these circumstances the insurer may be required to pay compensation to the driver (for example they may need to compensate for the loss of wages while the driver undergoes medical treatment). The may need to pay damages for legal and medical bills or for pain and suffering caused by the accident. And of course there may be payments for towing the vehicle to a recovery station, the repair of vehicles involved in the accident to restore the condition to pre-accident levels and even for rental vehicles for the parties while they await the repair of their original vehicles.
Thus in auto insurance the insured party receives a general promise that in the event of specific instances that the insurer will provide a means of restoring the injured party to make them “whole” again.
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Additional Indemnity Definitions
- Investopedia
- Wikipedia
Frequently Asked Questions
What is indemnity auto insurance?
Indemnity auto insurance, also known as traditional auto insurance or standard coverage, is a type of insurance policy that provides financial protection to the policyholder in the event of damage, theft, or accidents involving their vehicle. It is the most common form of auto insurance and offers a wide range of coverage options.
What does indemnity auto insurance cover?
Indemnity auto insurance typically covers damages to your vehicle caused by collisions, theft, vandalism, fire, natural disasters, and other specified perils. It may also provide liability coverage for bodily injury or property damage caused to others by your vehicle, legal expenses, and medical payments for injuries sustained in an accident.
How does indemnity auto insurance work?
When you purchase an indemnity auto insurance policy, you pay a premium to the insurance company. In return, the insurer agrees to cover certain losses and damages specified in the policy, up to the policy limits. If you have an accident or experience a covered event, you can file a claim with your insurance company to receive compensation for the damages or losses incurred, minus any deductibles.
What factors can affect the cost of indemnity auto insurance?
The cost of indemnity auto insurance can vary based on several factors, including your driving history, age, gender, location, type of vehicle, annual mileage, coverage limits, deductible amount, and any additional coverage options you choose. Insurance companies also consider factors such as your credit history and the claims history of the area where you live.
Can I choose the coverage limits and deductibles for my indemnity auto insurance policy?
Yes, you typically have the flexibility to choose the coverage limits and deductibles that best suit your needs and budget. Higher coverage limits and lower deductibles generally result in higher premiums, while lower coverage limits and higher deductibles can lower your premium but increase your out-of-pocket expenses in the event of a claim.
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Travis Thompson
Licensed Insurance Agent
Travis Thompson has been a licensed insurance agent for nearly five years. After obtaining his life and health insurance licenses, he began working for Symmetry Financial Group as a State Licensed Field Underwriter. In this position, he learned the coverage options and limits surrounding mortgage protection. He advised clients on the coverage needed to protect them in the event of a death, critica...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.