Indemnity is a comprehensive piece of insurance compensation for damages or loss and may also refer to an exemption from liability for damages. But not everyone has the option to get covered by this kind of insurance. For instance, some third party coverage insurers in fact do not cover indemnification payments to the credit card processor after a data breach.
Indemnity is considered to be a contractual agreement between two parties where one party agrees to pay for losses or damages that are caused by another party. So, with many different variables and factors to consider, it’s important to know how indemnity works and who or what’s covered for indemnity payments.
How it Works
An indemnity clause is a standard policy component in most insurance policies. To get down to the nitty-gritty of what’s covered and to what extent, it goes down to the specific agreement. Any indemnification agreement has what is known as a period of indemnity, which is a specific length of time for which the payment is valid.
Many contracts include a letter of indemnity, which can guarantee that both parties involved in a claim will meet the contract stipulations or an indemnity must be paid. This is a common part of most agreements set up between businesses and individuals. It can also apply to larger scale set-ups like relationships between businesses and government entities.
Special Considerations to Think About
Indemnity is paid out by cash or by way of repairs or replacement depending on the terms of the initial agreement. Indemnity insurance is a way for a company to obtain protection from indemnity claims and it protects the holder from having to pay the entire sum of an indemnity. This is true even if the holder is responsible for the cause of the indemnity itself.
Many companies make indemnity insurance a must as lawsuits can be common. Examples can relate to malpractice insurance, which is a common thing in the medical field, and errors and omissions (E&O) insurance, which protects companies and their employees against claims made by clients. This kind of protection applies to any and all industries.
For cyber liabilities, third party coverage for cyber liabilities can also be covered, like through FGIB. To transfer the risk involved with cybercrimes, this kind of coverage can help out community banks, commercial lenders, and fintech companies, for example.
Indemnity insurance covers the costs of an indemnity claim, which can include court costs, fees, and settlements. The amount of coverage provided by insurance depends on the agreement itself, and the cost of the insurance is related to many factors such as the history of indemnity clams.
Acts of Indemnity
An act of indemnity provides protection to those who have acted in an illegal way when it comes to being subject to penalties. This type of exemption usually applies to public officers, including cops and government officials, who are moved to break the law in order to do their job. Such protection is granted to a group of individuals who committed an illegal act for the greater good.
About Financial Guaranty Insurance Brokers
Since 1983, Financial Guaranty Insurance Brokers has distinguished itself as a provider of Professional Liability, Cyber Liability, and Crime insurance products for entities of all types. To receive timely, personalized service from a knowledgeable and experienced staff, call us today at (626) 793-3330 to speak with one of our professionals.