In event of a loss, which insurance principle suggests that the insured should not profit from a claim?

The principle that states the insured should not profit from a claim is known as indemnity. This principle is foundational in insurance, ensuring that when a loss occurs, the compensation provided by the insurer will restore the insured to the financial position they were in prior to the loss, neither better nor worse. Essentially, indemnity prevents individuals from receiving more than the actual financial loss suffered, thereby discouraging fraudulent claims or incentivizing over-insurance.

For example, if a homeowner experiences property damage covered by their policy, the claims process will aim to reimburse them for the actual cost of repairs rather than allowing them to receive money beyond this amount. The focus is on making the insured whole rather than benefiting financially from the incident.

In contrast, the other options present different concepts related to insurance but do not directly address the idea of preventing profit from a claim. Actual Cash Value refers to calculating compensation based on the item's current value, considering depreciation. Broad Coverage pertains to the extent and comprehensiveness of the policy's coverage, while Subrogation relates to the insurer's right to pursue a third party for recovery after compensating the insured. Each of these concepts serves a different role within the insurance framework, but none encapsulate the notion of preventing profit from loss like indemn