Indemnity means that the insured is entitled to a specific amount of compensation for a loss that is tied to a replacement, reimbursement, or fair-market value. The primary difference is that with indemnity insurance, there is no “profit” so to speak.he amount of compensation received cannot be directly correlated with the loss. For example, life insurance is non-indemnity insurance because you cannot place a value or a cost of replacement on a person’s life.