General Insurance PrinciplesQuestion 139 of 474
The principle of indemnity is BEST expressed by which statement?
a.The insured is entitled to collect from every available policy on a pyramided basis
b.The insured should be financially better off after a loss than before, to compensate for inconvenience
c.The insurer must always pay the policy limit regardless of the actual loss amount
d.The insured should be restored to the same financial position as before the loss, no better and no worse
Explanation
Indemnity means the insured is restored to the SAME financial position as before the loss — not enriched, not impoverished. That is why payments are capped at the actual loss, why subrogation prevents double recovery, and why coinsurance encourages adequate insurance to value.
Law Reference: Cal. Ins. Code §2051; industry indemnity principleThis topic, taught in full in the Personal Lines Insurance Producer guide. Personal Lines Insurance Producer — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
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