What does the term 'Indemnity' refer to in insurance contracts?

The term 'Indemnity' in insurance contracts refers to the principle of restoring a policyholder to the financial position they were in before a loss occurred, essentially compensating them for their financial loss. This concept is foundational in insurance and ensures that individuals do not profit from their insurance, but rather receive compensation that reflects their actual loss. Indemnity is designed to cover the costs associated with claims and ensure that the insured can recover from the incident without enhancing their financial status.

In the context of the other options, they more accurately describe different insurance concepts rather than indemnity itself. For example, increasing coverage without an extra charge does not align with indemnity, which is solely focused on compensation for losses. Similarly, adjusting premiums based on age pertains to underwriting practices and pricing rather than the principle of indemnification. Lastly, the process of claiming benefits isn't a direct definition of indemnity but rather a procedural aspect of how benefits are accessed post-incident.