What is the legal term for the ability to recover a loss from an insurance policy?

The legal term for the ability to recover a loss from an insurance policy is referred to as indemnity. Indemnity is a fundamental principle of insurance that ensures an insured party is compensated for a loss in a way that restores them to their financial position immediately prior to the loss. This principle prevents the insured from profiting from the insurance coverage; instead, it aims to provide financial protection against losses that might occur.

For example, if a homeowner experiences damage to their property, the indemnity clause in their insurance policy allows them to claim the cost of repairs or replacement. This process ensures that their financial stability is maintained without yielding a profit from the claim.

The other concepts mentioned serve different purposes in insurance. A deductible is the amount the insured must pay out of pocket before insurance coverage kicks in. The subrogation clause allows an insurer to pursue recovery from a third party that caused a loss after they have already compensated the insured. Salvage refers to the recovery or resale of damaged property to minimize losses. Each of these terms plays a relevant role in the insurance process, but none encapsulates the idea of recovering losses from an insurance policy as accurately as indemnity does.