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Indemnity is a type of insurance that covers a wide range of damages and losses. In the indemnity clause, one party commits to compensate another party for any prospective loss or damage. More common is in insurance contracts, in exchange for premiums paid by the insured to the insurer, the insurer offers to compensate the insured for any potential damages or losses. Depending on the clause of the indemnity agreement, indemnity may be paid in cash or in the form of repairs or replacement.

Indemnity also refers to legal exemption from penalties attaching to unconstitutional or illegal actions, typically granted to public officers.

[Last updated in April of 2022 by the Wex Definitions Team]