Also known as: Indemnification clause · Hold harmless · Indemnify
A contract promise by one party to cover the losses, damages, or legal costs of another party.
Indemnification is a contractual obligation where one party (the indemnitor) agrees to compensate another party (the indemnitee) for specified losses, claims, damages, or legal expenses. In vendor and enterprise contracts, the indemnification clause is where you promise to cover your customer if your product, service, or negligence causes them a loss. It is closely tied to insurance: the clause creates the obligation, and your liability policy is what actually funds it. A broad indemnification clause you cannot back with coverage is a common way founders take on uninsured risk without realizing it.
Indemnification is a promise by one party to cover another party’s losses, damages, or legal costs arising from a defined event, such as your product causing harm or your work triggering a claim. It shifts financial responsibility for those losses onto the indemnifying party.
Indemnification is the contractual obligation to cover someone’s loss. Insurance is the funding mechanism that pays for it. A well-drafted contract makes sure the indemnification you agree to is backed by adequate liability limits, so a claim does not come out of the company’s own pocket.
Founders often negotiate to cap indemnification (for example, at the contract value or their insurance limits) and to exclude the other party’s own negligence. An uncapped or one-sided clause can create exposure well beyond what any policy will pay. Have counsel review the clause against your coverage.
Definitions are educational and may be modified by your specific policy language, endorsements, and state rules. For regulatory guidance, refer to the California Department of Insurance or the NAIC.
Last updated: July 2026.