What is the main intention of indemnity in insurance?

The main intention of indemnity in insurance is to reinstate the policyholder's financial condition. Indemnity is a fundamental principle in insurance, designed to restore the insured to the same financial position they were in before a loss occurred, without allowing them to profit from the insurance claim.

This principle ensures that compensation is only provided for the actual loss sustained and prevents situations where policyholders could deliberately or unintentionally gain financially from their claims, which would be contrary to the essence of insurance as a risk management tool. Indemnity aims to bring the insured back to their original state, ensuring financial stability after a loss while maintaining fairness in the insurance process.

The other choices do not align with the concept of indemnity. The goal of maximizing profit for the policyholder or eliminating all financial losses does not reflect how indemnity operates. Insurance is designed to cover losses but does so within certain parameters, rather than encouraging high claims or providing profit incentives.