Indemnification

Indemnification is the foundational principle of insurance that aims to return the policyholder to the exact financial position they were in prior to a loss, nothing more and nothing less. This means you are “made whole” but cannot profit from a disaster. Whether your home is repaired or replaced, the goal is to restore the property to its pre-damage condition. This prevents moral hazard by ensuring that homeowners have no financial incentive to cause intentional property damage.