Indemnity is a legal and financial term that refers to a form of compensation or protection provided to one party by another party. It involves the act of compensating someone for a loss, damage, or liability they have incurred or may incur in the future.

In the context of contracts and agreements, indemnity clauses are often included to allocate the risk of certain events or situations between the parties involved. These clauses typically state that one party agrees to compensate or hold harmless the other party for any losses, damages, or expenses resulting from specified events or claims. The purpose is to protect the indemnitee from potential financial harm or legal consequences by shifting the responsibility to the indemnitor.

The scope of indemnity can vary depending on the specific agreement or context. It may cover a broad range of losses and liabilities, including legal costs, damages, fines, penalties, or other expenses incurred due to a breach of contract, negligence, or any other specified circumstances.

Indemnity is commonly used in various fields such as insurance, real estate, construction, and commercial transactions. It provides a means of safeguarding against potential risks and ensuring that parties are financially protected in case of unforeseen events or legal claims.