A contract of indemnity is a contract between two persons where one party agrees to compensate or reimburse a loss incurred by the other party. The insurance company promises to cover a loss that may be suffered by an insured. In indemnity contracts, it is not certain that a loss will be suffered. It is a matter of probability.

Life insurance is not covered in the indemnity clause, because death is an inevitable occurrence, hence the insurance company simply provides financial protection for the family of the insured in the event of their passing. If the insured dies before the expiration of the contract, the insurer will compensate the deceased family, and vice-versa.