Which principle ensures that an insured should not profit from a loss?

The principle that ensures an insured should not profit from a loss is known as indemnity. Indemnity is a fundamental concept in insurance that seeks to restore the insured to the financial position they were in before the loss occurred, without allowing them to gain any profit. This principle is crucial in maintaining fairness in the insurance system, as it prevents the insured from receiving more than the actual loss sustained.

For instance, if an insured property is damaged and subsequently repaired, the insurance payout should correspond closely to the repair costs, not exceed it. This ensures that the insured is compensated for their actual loss and encourages responsible behavior among policyholders. Indemnity upholds the integrity of the insurance system by ensuring that the purpose of insurance is to cover losses rather than provide a financial windfall.

The other principles mentioned, such as subrogation, reinsurance, and contribution, serve different functions within the insurance framework but do not specifically relate to the idea of preventing profit from a loss. Subrogation allows an insurer to seek recovery from a third party responsible for the loss after compensating the insured. Reinsurance involves the insurance company taking on additional coverage from another insurer to manage risk, and contribution refers to the method of distributing claims among multiple insurers covering the