THE PRINCIPLE OF INDEMNITY IN INSURANCE LAW

Basically, compensation of damage is main purpose of Indemnity Insurance contract that is founded on of indemnity. According to this principle, full compensation of e victim’s losses, up to ceiling of insurer’s obligations, is main and inherent effects of Indemnity Insurance contract in insurance law. Thus, main obligation of an insurer in indemnity insurance is compensation so victim should be placed in a situation that it was if insured risk actually has not occurred.Thus, in Indemnity Insurance contract the Indemnity principle as underlying has two function. First, insurer should compensate damage incurred to property insured in property insurance and to insured person in personal liability insurance up to ceiling of insurer’s obligations completely. Therefore, compensation should placed victim in a situation that it was if insured risk actually has not occurred.Second, compensation and payment of damages should not increase victim assets since insurance should never be a source of profit for victims. This is binding rule of insurance contracts according to it, insurer is committed to compensate victim’s actual damage (assessed) up to ceiling of her obligations, in accordance with terms and conditions of insurance policy.