Indemnity insurance is when the insurance company agrees to compensate you for a loss that you may suffer as a result of the event you have insured yourself against – for example, if you insure your house against fire and your house burns down, you will be compensated. When the contract is taken out, a maximum amount that the insurance company will pay out is agreed in the contract and your monthly premiums are based on this maximum amount. But the actual amount that the insurance company will have to pay in the end is not known, and will depend on the value of your loss.