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What’s indemnity insurance coverage? – Bankrate.com

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We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free – so that you can make financial decisions with confidence.
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The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
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Indemnity is an agreement between two parties in which one party is responsible for compensating another for damages or losses they may incur. Indemnity insurance protects a policyholder from indemnity claims in exchange for monthly or annual premiums. If a professional or business causes damages or loss to a third party, an indemnity insurance policy can help cover the settlement and the policyholder’s legal fees.
Indemnity clauses are present in insurance contracts and business contracts, but indemnity insurance is something separate. You need indemnity insurance if you have agreed to indemnify another party and you want coverage for potential lawsuits that could arise from personal negligence. Here’s what you should know about indemnity agreements and how you could go about deciding whether to purchase indemnity insurance.
Indemnity is one party’s promise to compensate another for potential losses or damages. Indemnification is the act of compensating another party after a loss has occurred. In an indemnity contract, the indemnitee is protected from liability and the indemnitor holds the indemnitee harmless.
For example, if a physician works for a hospital, they might be required to sign an indemnity agreement that holds the hospital harmless. The physician indemnifies the hospital so that the hospital can not be the target of any lawsuits brought as a result of the physician’s actions. Therefore, the physician may require malpractice insurance — which is a form of indemnity insurance — to protect themself from potential patient lawsuits.
When you sign up for an auto insurance policy, you are the indemnitee and your insurance company is the indemnitor. Your insurance company agrees to compensate you or another party for losses or damages according to the policy’s terms and limits. Your auto insurance contract makes it your insurance company’s responsibility to indemnify you after you are involved in a covered accident. A car insurance company may cover a policyholder in the following ways:
In terms of auto coverage, indemnity insurance from an auto insurance company is required in most states, excluding New Hampshire and Virginia. However, outside of state-required levels of liability, maintaining a full coverage policy can help avoid the financial burden of paying for vehicle damage out of pocket.
You may want to consider purchasing indemnity insurance if one of the following is true:
Accidental death coverage, also known as double indemnity insurance, is a rider often available for life insurance plans. It could also be a stand-alone policy that provides a payout to the policyholder’s beneficiaries if the policyholder dies or is dismembered in an accident. Typically, policies provide this payout in addition to the death benefit. Accidental death and dismemberment coverage (AD&D) will not provide an indemnity if the insured dies of natural causes.
Outside of a standard auto insurance policy, some other common types of indemnity insurance include:
Yes. Because the IRS considers insurance costs for a business as eligible for a write-off, professional indemnity insurance usually qualifies as a business expense and can typically be deducted the cost of your premiums on your tax return. Commercial auto insurance for business purposes may qualify as a professional expense, for example.
If someone files a lawsuit against you, the settlement could potentially wipe out your assets. Drivers encounter multiple risks on the road, such as collisions leading to serious injury or damage. With this risk in mind, indemnity insurance in the form of an auto insurance policy can be especially beneficial to protect your finances. Additionally, if you work in an industry that makes you vulnerable to lawsuits, indemnity insurance is often worth the expense.
Bankrate.com is an independent, advertising-supported publisher and comparison service. Bankrate is compensated in exchange for featured placement of sponsored products and services, or your clicking on links posted on this website. This compensation may impact how, where and in what order products appear. Bankrate.com does not include all companies or all available products.
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