What does indemnity mean?
An indemnity is a legal or financial arrangement that protects someone against loss or liability. It commonly appears in contracts, insurance policies, employment agreements, and corporate governance documents, where one party agrees to cover the costs or consequences of specified claims, damages, or legal expenses. Depending on the context, indemnity can also mean the compensation itself rather than the agreement providing protection. The word often conveys a formal, contractual character and implies that responsibility for a defined risk is shifted from the protected party to the indemnifying party. It is related to, but not identical with, insurance: insurance is a common means of obtaining indemnity, while the legal obligation may arise from a contract. In modern usage, indemnity is especially prominent in law and business, though the term also has an older sense of compensation or restitution for loss.
nounAn agreement or legal obligation that protects someone from financial loss or liability. It may also refer to compensation paid to cover such a loss.
- An agreement or legal arrangement that protects a person or organization from liability or financial loss.
- Money or compensation paid to cover loss, damage, or costs under such an arrangement.
"The company required its directors to provide an indemnity against legal costs arising from their duties."
"The settlement included an indemnity covering the publisher's legal expenses."
"The policy provides indemnity for losses caused by fire, provided the damage was not intentional."
The plural is used for multiple indemnity arrangements or, less commonly, multiple compensatory payments.
"The directors received indemnities from the company for their legal expenses."
An indemnity shifts the financial risk of loss from one party to another, turning an uncertain liability into something that can be insured or contractually allocated.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Where does indemnity come from?
Indemnity entered English in the 16th century from Latin indemnitas, meaning “safety” or “immunity from loss.” The word was formed from inde-, a form of in- meaning “not,” and damnum, meaning “loss” or “damage.” Its underlying Latin root also appears in related English words such as condemn, while forms connected with compensation developed into indemnify and indemnification.
Related word forms
How indemnity is actually used
Most common in legal, insurance, and business contexts. In contract language, it generally protects a party from specified claims, expenses, or losses rather than eliminating every possible liability.
Easily confused with indemnity
Indemnity provides protection against specified financial loss or liability, whereas immunity grants freedom from legal obligation, liability, or infection.