Insurance companies operate on the principal of indemnity. This means that an insured person or firm collector

Answer Details

The principle of indemnity in insurance means that an insured person or firm can claim for the actual amount of the loss suffered due to an insured event, subject to the limit of the sum insured. In other words, the insurance company is obligated to pay the amount that will restore the insured party to the same financial position they were in before the loss occurred, and not more than that. Therefore, the insured person or firm can claim for the damage or loss suffered, and the insurance company will pay out a sum equal to the amount of the loss suffered, up to the limit of the sum insured. It is important to note that the principle of indemnity applies only to the actual loss or damage suffered, and not to any profit or loss of future business.