The principle of indemnity cannot apply in a straightforward way to life assurance, for no sum of money can equate the loss of life. Similarly in personal accident cases the loss of a limb cannot be measured accurately in terms of money. All that these policies can do is to provide a sum of money, called the benefit payment, as compensation.
Even so the principle does have some influence. Life assurance premiums are roughly related to the way life of the person concerned, for he must be able to afford the premiums, and weekly benefits for loss of earnings after an accident are not allowed to exceed the normal, earnings of the insured.
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