What type of compensation does Indemnity typically involve?

Indemnity typically involves compensation that covers the economic loss incurred by the policyholder. This principle is fundamental in insurance, where the goal is to restore the insured party to their financial position prior to the loss, without allowing them to profit from the situation. This means that the compensation provided is directly related to the actual loss suffered, whether that be from property damage, liability claims, or other economic impacts related to the insured event.

The other options do not align with the essence of indemnity. Penalties for late submission of claims involve punitive measures rather than compensation for loss. Administrative fees pertain to the operational costs of processing a claim and do not represent a loss incurred by the policyholder. Lastly, increased premiums based on claim history represent a future cost rather than a reimbursement or compensation for past losses. Consequently, the focus of indemnity is strictly on addressing the economic losses sustained by the policyholder.