Final answer:
Indemnity in insurance ensures returning to the pre-loss condition through payment, deductible defines initial coverage amount, Law of Large Numbers assists in risk calculation.
Explanation:
Indemnity is the insurance payment that covers the same value as the loss suffered. It aims to return the insured person or business to the condition prior to the loss, either by replacing or repairing the property or paying out its established value as per the insurance contract.
The principle of deductible is also important in insurance policies, as it defines the amount the insured individual must cover before the insurance company starts to pay out.
Insurance companies use the Law of Large Numbers to calculate exposure risks and determine premium levels, ensuring they can offer affordable coverage while still making a profit.
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