General Insurance PrinciplesQuestion 139 of 158
The principle of indemnity is BEST expressed by which statement?
a.The insured should be financially better off after a loss than before, to compensate for inconvenience
b.The insurer must always pay the policy limit regardless of the actual loss amount
c.The insured should be restored to the same financial position as before the loss, no better and no worse
d.The insured is entitled to collect from every available policy on a pyramided basis
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 principlePractice all 158 questions free — no signup required.
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