The obligation to compensate someone for their loss or damage.
Indemnity means making someone whole after a loss. In insurance, the insurer indemnifies the policyholder. In contracts, indemnification clauses require one party to cover the other's losses from specified events.
Liability is legal responsibility for a loss—being at fault. Indemnity is the obligation to compensate for that loss and make the injured party whole. In practice, a liability finding establishes who is responsible, and indemnity is the mechanism (through insurance or a contract clause) that actually pays for it.
To indemnify someone means you agree to cover their losses, damages, or legal costs arising from specified events—typically your own acts, products, or services. Vendor contracts commonly include an indemnification clause requiring you to defend and reimburse the client if your work causes them harm. Your liability insurance is what funds these obligations.
They often appear together ("indemnify and hold harmless") but do different things. To indemnify is to reimburse the other party for losses they suffer. To hold harmless is to agree not to hold the other party responsible for certain losses in the first place. Together they shift both the cost and the blame for covered events onto the indemnifying party.
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.