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Last updated: April 6, 2024

Indemnity Insurance for Cars

All car insurance is indemnity insurance, but not all indemnity insurance is car insurance.

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The point of car insurance is to protect you from financial losses, a process known as indemnity. Essentially, you pay an insurance company to take on the financial risk if you get into a car accident. But while indemnification is a procedure you’re probably already familiar with, you may not know all the essential terms, definitions and applications. We’re here to change that.

What is Indemnity Insurance?

Indemnification Definition

To understand indemnity insurance, let’s first talk about indemnification. In the auto world, indemnification is an agreement that says an auto insurance company or any insurance provider or indemnity company will cover the costs of any losses from covered events, including bodily injuries, property damages, lawsuits, lost wages and more. Indemnity is another way of saying your insurer will pay for your losses.

How Indemnity Insurance Works for Cars

With car insurance, your insurer pays for covered losses following a collision or a noncollision event like inclement weather or vandalism. Essentially, it shifts the financial burden from you to the insurance company. For example, if you cause a car accident, under your liability coverage, indemnity auto insurance would pay for the medical bills and property damages you’ve caused others.

If you have collision and comprehensive coverage in your insurance plan, which is coverage no state requires, indemnity would cover you and your passengers’ injuries and property damages too. Liability coverage, in contrast, only pays for people and damages outside your vehicle.


The benefit of indemnity insurance is that you won’t be responsible financially for your losses as long as your auto insurance policy covers them. So, if someone steals your car and you have comprehensive coverage, your insurance provider will pay to replace the vehicle.


Indemnity insurance extends far beyond car insurance. It also encompasses other types of policies, such as homeowners insurance. Let’s go through a few examples.

Vehicle Accident

Not only would indemnity insurance cover the other party’s losses, but if you had collision insurance as well as medical payments coverage/personal injury protection, it also would cover the losses you and your passengers face.

Nonvehicle Collision

Of course, events other than collisions can damage cars as well. For instance, if someone vandalized your vehicle, your insurer would indemnify you for the property damage, provided you had comprehensive coverage.


No state requires collision and comprehensive coverage. You have to add it under full coverage car insurance.


Hospital indemnity insurance pays policyholders for costs they incurred during covered hospitalizations. The plan could cover:

  • Copayments
  • Deductibles
  • Other life expenses that result from hospitalizations, such as lost wages, childcare costs, and more1

Like with car insurance, hospital indemnity falls under either bodily injury coverage or medical payments coverage/personal injury protection (MedPay/PIP), depending on your state’s fault system. While bodily injury coverage pays for any injuries you cause people outside your vehicle, MedPay/PIP covers you and your passengers’ injuries.


No-fault states require PIP, while at-fault states require MedPay.

Home Damage

Indemnity insurance applies to homeowners insurance if, say, a tree falls on your house and you want to be reimbursed for the cost of the repairs.2

Who Should Have Indemnity Insurance

As far as car insurance goes, everyone should have indemnity insurance as it’s just another word for car insurance. Every state except New Hampshire and Virginia requires car insurance, so you could get in legal, not to mention financial, trouble if you drive without insurance.


Although indemnity insurance may not be a term used in everyday conversation, if you have car insurance, you already understand the basic concept. Hopefully, the details above shed more light on the subject. Read our frequently asked questions (FAQs) below for even more information.


What is the difference between indemnity and insurance?

Indemnity is a type of insurance where the financial burden for losses shifts from the insured to the insurer.

What is the GEICO indemnity insurance company?

The GEICO indemnity insurance company is an organization that provides different types of insurance policies, including:

  • ATV
  • Auto
  • Bicycle
  • Boat
  • Business
  • Collector car
  • Condo
  • Earthquake
  • Event
  • Flood
  • Homeowners
  • Identity protection
  • Jewelry
  • Landlord
  • Life
  • Mobile home
  • Motorcycle
  • Overseas
  • Pet
  • Renters
  • RV
  • Travel
  • Umbrella

Are indemnity plans worth it?

Indemnity plans are worth it, particularly for car insurance. Most states require car insurance, which would pay for bodily injuries and property damage you’ve caused while driving.

What is fixed indemnity insurance?

Fixed indemnity insurance is insurance that provides a specific benefit for a specific medical expense rather than for total medical expenses minus a deductible. For example, fixed indemnity insurance may have a specific limit for urgent care visits, X-rays and antibiotics, instead of having one limit for all healthcare costs.


  1. Know the difference: Accident, hospital indemnity and critical illness insurance. Aflac. (2023).

  2. Indemnification. AARP Auto and Home Insurance Plan from The Hartford.