The principle according to which a person who has suffered a loss is restored to the same financial position that he was in immediately prior to the loss, subject in the case of insurance to any contractual limitation as to the amount payable. The application of this principle is called indemnification. Most contracts of insurance are contracts of indemnity.
A loss =can exceed the policy limit.
Life insurance and personal accident insurance are not contracting of indemnity as the payments under those contracts for loss of life or bodily injury are not based on this principle.