What does the term 'indemnify' mean in the context of insurance?

The term 'indemnify' in the context of insurance refers to the obligation of the insurer to compensate the insured for covered losses. Insurance is fundamentally built on the principle of indemnity, which aims to restore the insured to the financial position they were in before the loss occurred, without allowing them to make a profit from the loss.

When a policyholder experiences a loss that is covered under their insurance policy, the insurance company will assess the claim and provide compensation based on the terms of the policy, including any deductibles and coverage limits. This process ensures that individuals and businesses can recover from unexpected financial setbacks by receiving payments for damages or losses.

The other options do not accurately reflect the meaning of 'indemnify.' Denying a claim does not relate to the concept of indemnification, as it involves rejecting a request for compensation. Protecting against future claims encapsulates a broader sense of risk management, while negotiating lower premiums pertains to the cost aspect of insurance rather than the compensation for losses. Thus, 'indemnify' specifically addresses the core function of insurance in relation to compensating insured parties for their losses.