2.2.4 Value vs. Indemnity
Valued contracts pay a predetermined amount with no way to assess loss. When the insured dies, the insurer pays the stated death benefit of the life insurance policy.
Insurance is a contract of utmost good faith. Life insurance contracts are valued contracts because they pay a predetermined amount with no way to assess loss.
Indemnity contracts (or reimbursement contracts) pay the amount of the loss only (up to the policy limit) by paying the amount necessary to return the insured to the same position he/she was in before the loss occurred.
