What type of contract is established when one party agrees to indemnify another?

A contract that involves one party agreeing to indemnify another is specifically characteristic of an insurance contract. In insurance agreements, the insurer (the party providing coverage) agrees to provide financial compensation or cover losses for the insured (the party seeking protection) in the event of a specified risk or event occurring, such as damage to property or health-related issues.

Indemnity is a fundamental principle in insurance, where the insured party is protected against financial loss due to unexpected events, while the insurer bears the risk and responsibility of compensating for these losses as outlined in the policy. This mutual understanding and transfer of risk is what fundamentally differentiate insurance contracts from other types of agreements like loan agreements, rental agreements, or service contracts, which do not inherently focus on risk transfer and financial compensation for uncertain future events.