The principle of indemnity means an insured who suffers a covered loss should be:
Explanation
Indemnity restores the insured to approximately the financial position held just before the loss, making them whole without allowing a profit. Personal lines property coverages are built on this principle, which is why tools like actual cash value, deductibles, and other-insurance clauses exist. Paying the full limit for every loss, regardless of the actual amount, would violate indemnity by permitting gain.
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