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In a contract between two parties, indemnity refers to the legal obligation of one party to hold the other party harmless from any potential future losses, damages, or liabilities. The person who is giving the indemnity is referred to as the indemnitor, and the one who is receiving it is referred to as the indemnitee.
In the world of finance, the term "indemnity" is frequently used to refer to insurance contracts in which an insurance provider promises to defend a policyholder from any damages that might arise from an insured occurrence, like an accident or a natural catastrophe. The policyholder is the indemnitee in this instance, whereas the insurance company is the indemnitor.
Moreover, indemnification can be utilized in mergers and acquisitions, where the buyer of a company might ask the seller to offer protection from any losses or liabilities that could occur after the deal closes. The buyer is the indemnitee in this situation, whereas the seller is the indemnitor.
In general, indemnity gives a person some financial security against conceivable future losses, harms, or liabilities. It enables the party being indemnified to shift the risk posed by a particular incident to a different party, lowering their overall risk exposure.
