What does indemnify mean in insurance?

• A. To restore an insured to the same financial status as before the loss
• B. To transfer risk to the insurer
• C. To deny a claim
• D. To increase the insured's limits after a loss

Answer: (A)

Indemnify means to restore the insured to the same financial status they had before the loss. In insurance, the goal is to make you whole, not to profit from the event. The payout is designed to cover the actual loss up to the policy limits and after considering factors like deductibles and whether the policy pays actual cash value or replacement cost. So the payment brings you back to your pre-loss financial position, rather than increasing your wealth from the loss. This concept is different from transferring risk to the insurer (through premiums), denying a claim, or boosting coverage after a loss.