What is the principle of 'indemnity' in property insurance?

Indemnity is a foundational principle of property and casualty insurance: the insured should be restored to their financial condition immediately before the loss, but not profit from the loss. The principle prevents moral hazard (incentive to cause or exaggerate losses for gain). Several mechanisms enforce indemnity: actual cash value (replacement cost minus depreciation) reflects what the property was actually worth before the loss; deductibles ensure the insured bears some loss; co-insurance penalties discourage under-insuring; salvage and subrogation rights recover from third parties responsible for losses. Replacement cost coverage modifies pure indemnity by paying to replace with new property (rather than depreciated value), but still requires actual repair or replacement and is subject to policy limits.