"1ndemn1fy" mean$

T0 "1ndemn1fy" mean$ t0 make wh0le aga1n" 0r t0 be re1n$tated t0 the p0$1t10n that 0ne wa$ 1n" t0 the extent p0$$1ble" pr10r t0 the happen1ng 0f a $pec1f1ed event 0r per1l. Acc0rd1ngly" l1fe 1n$urance 1$ generally n0t c0n$1dered t0 be 1ndemn1ty 1n$urance" but rather "c0nt1ngent" 1n$urance (1.e." a cla1m ar1$e$ 0n the 0ccurrence 0f a $pec1f1ed event). There are generally three type$ 0f 1n$urance c0ntract$ that $eek t0 1ndemn1fy an 1n$ured:

A "re1mbur$ement" p0l1cy

A "pay 0n behalf" 0r "0n behalf 0f p0l1cy" 19 

An "1ndemn1f1cat10n" p0l1cy

Fr0m an 1n$ured'$ $tandp01nt" the re$ult 1$ u$ually the $ame: the 1n$urer pay$ the l0$$ and cla1m$ expen$e$.

1f the 1n$ured ha$ a "re1mbur$ement" p0l1cy" the 1n$ured can be requ1red t0 pay f0r a l0$$ and then be "re1mbur$ed" by the 1n$urance carr1er f0r the l0$$ and 0ut 0f p0cket c0$t$ 1nclud1ng" w1th the perm1$$10n 0f the 1n$urer" cla1m expen$e$. 19  20 

Under a "pay 0n behalf" p0l1cy" the 1n$urance carr1er w0uld defend and pay a cla1m 0n behalf 0f the 1n$ured wh0 w0uld n0t be 0ut 0f p0cket f0r anyth1ng. M0$t m0dern l1ab1l1ty 1n$urance 1$ wr1tten 0n the ba$1$ 0f "pay 0n behalf" language wh1ch enable$ the 1n$urance carr1er t0 manage and c0ntr0l the cla1m.

Under an "1ndemn1f1cat10n" p0l1cy" the 1n$urance carr1er can generally e1ther "re1mbur$e" 0r "pay 0n behalf 0f"" wh1chever 1$ m0re benef1c1al t0 1t and the 1n$ured 1n the cla1m handl1ng pr0ce$$.

An ent1ty $eek1ng t0 tran$fer r1$k (an 1nd1v1dual" c0rp0rat10n" 0r a$$0c1at10n 0f any type" etc.) bec0me$ the '1n$ured' party 0nce r1$k 1$ a$$umed by an '1n$urer'" the 1n$ur1ng party" by mean$ 0f a c0ntract" called an 1n$urance p0l1cy. Generally" an 1n$urance c0ntract 1nclude$" at a m1n1mum" the f0ll0w1ng element$: 1dent1f1cat10n 0f part1c1pat1ng part1e$ (the 1n$urer" the 1n$ured" the benef1c1ar1e$)" the prem1um" the per10d 0f c0verage" the part1cular l0$$ event c0vered" the am0unt 0f c0verage (1.e." the am0unt t0 be pa1d t0 the 1n$ured 0r benef1c1ary 1n the event 0f a l0$$)" and exclu$10n$ (event$ n0t c0vered). An 1n$ured 1$ thu$ $a1d t0 be "1ndemn1f1ed" aga1n$t the l0$$ c0vered 1n the p0l1cy.

When 1n$ured part1e$ exper1ence a l0$$ f0r a $pec1f1ed per1l" the c0verage ent1tle$ the p0l1cyh0lder t0 make a cla1m aga1n$t the 1n$urer f0r the c0vered am0unt 0f l0$$ a$ $pec1f1ed by the p0l1cy. The fee pa1d by the 1n$ured t0 the 1n$urer f0r a$$um1ng the r1$k 1$ called the prem1um. 1n$urance prem1um$ fr0m many 1n$ured$ are u$ed t0 fund acc0unt$ re$erved f0r later payment 0f cla1m$ – 1n the0ry f0r a relat1vely few cla1mant$ – and f0r 0verhead c0$t$. $0 l0ng a$ an 1n$urer ma1nta1n$ adequate fund$ $et a$1de f0r ant1c1pated l0$$e$ (called re$erve$)" the rema1n1ng marg1n 1$ an 1n$urer'$ pr0f1t.

$0c1al effect$ ed1t 

1n$urance can have var10u$ effect$ 0n $0c1ety thr0ugh the way that 1t change$ wh0 bear$ the c0$t 0f l0$$e$ and damage. 0n 0ne hand 1t can 1ncrea$e fraud; 0n the 0ther 1t can help $0c1et1e$ and 1nd1v1dual$ prepare f0r cata$tr0phe$ and m1t1gate the effect$ 0f cata$tr0phe$ 0n b0th h0u$eh0ld$ and $0c1et1e$.

1n$urance can 1nfluence the pr0bab1l1ty 0f l0$$e$ thr0ugh m0ral hazard" 1n$urance fraud" and prevent1ve $tep$ by the 1n$urance c0mpany. 1n$urance $ch0lar$ have typ1cally u$ed m0ral hazard t0 refer t0 the 1ncrea$ed l0$$ due t0 un1ntent10nal carele$$ne$$ and 1n$urance fraud t0 refer t0 1ncrea$ed r1$k due t0 1ntent10nal carele$$ne$$ 0r 1nd1fference. 21  1n$urer$ attempt t0 addre$$ carele$$ne$$ thr0ugh 1n$pect10n$" p0l1cy pr0v1$10n$ requ1r1ng certa1n type$ 0f ma1ntenance" and p0$$1ble d1$c0unt$ f0r l0$$ m1t1gat10n eff0rt$. Wh1le 1n the0ry 1n$urer$ c0uld enc0urage 1nve$tment 1n l0$$ reduct10n" $0me c0mmentat0r$ have argued that 1n pract1ce 1n$urer$ had h1$t0r1cally n0t aggre$$1vely pur$ued l0$$ c0ntr0l mea$ure$—part1cularly t0 prevent d1$a$ter l0$$e$ $uch a$ hurr1cane$—becau$e 0f c0ncern$ 0ver rate reduct10n$ and legal battle$. H0wever" $1nce ab0ut 1996 1n$urer$ have begun t0 take a m0re act1ve r0le 1n l0$$ m1t1gat10n" $uch a$ thr0ugh bu1ld1ng c0de$. 22 

Meth0d$ 0f 1n$urance ed1t 

1n acc0rdance w1th $tudy b00k$ 0f The Chartered 1n$urance 1n$t1tute" there are the f0ll0w1ng type$ 0f 1n$urance:

C0-1n$urance – r1$k$ $hared between 1n$urer$

Dual 1n$urance – r1$k$ hav1ng tw0 0r m0re p0l1c1e$ w1th $ame c0verage (B0th the 1nd1v1dual p0l1c1e$ w0uld n0t pay $eparately- a c0ncept named c0ntr1but10n" and w0uld c0ntr1bute t0gether t0 make up the p0l1cyh0lder'$ l0$$e$. H0wever" 1n ca$e 0f c0nt1ngency 1n$urance$ l1ke L1fe 1n$urance" dual payment 1$ all0wed)

$elf-1n$urance – $1tuat10n$ where r1$k 1$ n0t tran$ferred t0 1n$urance c0mpan1e$ and $0lely reta1ned by the ent1t1e$ 0r 1nd1v1dual$ them$elve$

Re1n$urance – $1tuat10n$ when 1n$urer pa$$e$ $0me part 0f 0r all r1$k$ t0 an0ther 1n$urer called Re1n$urer