Registered Insurance Brokers of Ontario (RIBO) Practice Exam

What does it mean when an insured is indemnified after a loss?

1. The insured receives a policy renewal.

2. The insured is compensated for their loss.

3. The insured owes money to the insurer.

4. The insured receives additional coverage.

The correct answer is: The insured is compensated for their loss.

When an insured is indemnified after a loss, it means that they are compensated for their loss. The principle of indemnity in insurance ensures that the insured is restored to their financial position before the loss occurred, without allowing them to profit from the loss. This concept is fundamental to insurance, as it aligns with the idea that insurance is meant to provide protection against financial hardship arising from unexpected events, rather than acting as a source of profit. Other options do not accurately describe indemnification. Receiving a policy renewal does not relate to the compensation for a loss, and owing money to an insurer signifies a financial obligation, not a settlement for a loss. Additionally, receiving additional coverage pertains to enhancements of the policy rather than the compensation process following a loss. Thus, being compensated for their loss accurately captures the meaning of indemnification in the context of an insurance claim.