What does it mean when an Insurance company undertakes to indemnify you against a loss or peril for which you took out insurance cover? The basis of indemnity is one of the cornerstones of short-term insurance, including car insurance and can be described as follows:

The insurance company undertakes to restore the insured party to the same financial position he/she was in just before the loss took place. Insurance is not for financial gain, you should not be placed in a better position than before the loss took place. If your car is damaged in an accident the insurance company will undertake to repair the damage as far as this is possible, they are not going to replace your car with a new one.

Insurers have the following options of indemnity should a loss take place:

• To pay out a lump sum in cash for the proven value of the loss. This method is often used for theft, money loss or in some all risk cases.
• To replace the lost or damaged item, here we can think of glass such as car windscreens.
• To pay for the repair, such as a car after accident damage.
• By reinstating the item, such as a building after it has been destroyed by fire.