From ArticleWorld

In simple terms Indemnity may be said to be a legal principle that specifies that an insured person should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position that existed before the loss. Thus, it is an obligation of one party to reimburse another party for losses which have occurred or which may occur in the future.

What indemnity means

Indemnity may have several meanings:

It may be seen as a payment of compensation and a security against losses. It may also be looked upon as a bond for protecting the policy holder against losses caused by third parties who do not carry out their responsibilities. The pledge of immunity from prosecution is also termed as indemnity as is the promise to buy or sell stocks and shares of a certain value, at an agreed price, before the expiry of a certain period.


Indemnity, in one form or another has existed from time immemorial. In 1807-1808 a Prussian statesman introduced a system of reforms wherein slaves were freed after their owners had been suitably reimbursed. In 1897, when the Zanzibar slaves were freed, the owners of these slaves were paid damages by way of compensation. Haiti paid hundreds and thousands of francs to the French government to recompense the French landlords for their lost slaves. In the US also the Lincoln government had made adequate arrangements to pay the southern landlords after the civil war and the freedom of the black people from slavery.