The term “indemnity” means “to compensate” or reimburse. The principle of indemnity is strictly followed in liability insurances.

Indemnity means a legal obligation to cover the liability of another. “To indemnify” does not merely mean to reimburse in respect of moneys paid but to save from loss in respect of the liability against which indemnity has been given.

Professional indemnity insurances are designed to provide the insured person protection against the financial consequences of legal liability. This policy is meant for professionals to cover liability falling on them as a result of errors and omissions committed by them whilst rendering professional service. If the insured is legally liable to pay damages or compensation to others, the policy will indemnify him subject to the terms and conditions and limitations of the contract.

Indemnity is also available in respect of legal costs awarded against the insured as well as legal costs and expenses incurred by the insured with the written consent of the insurers in the defence or settlement of claims.