Which insurance principle focuses on compensating the policyholder without profit?

The principle that focuses on compensating the policyholder without profit is indemnity. This principle is foundational in insurance as it ensures that an insured party is restored to the financial position they were in immediately before the loss occurred, without being able to profit from the insurance claim. This approach helps to prevent moral hazards, where a policyholder might engage in risky behavior if they could make a profit from a loss.

Indemnity supports the idea that the purpose of insurance is to cover losses rather than to serve as a profit-making venture for the insured. It establishes that the compensation should reflect the true value of the loss, rather than allowing the insured to gain financially from the incident they have experienced.

Other concepts such as contribution, subrogation, and proximate cause play different roles within insurance. Contribution deals with multiple insurance policies covering the same risk and ensuring that claims are settled proportionately. Subrogation gives the insurer the right to pursue a third party responsible for the loss after compensating the policyholder. Proximate cause relates to establishing the direct cause of a loss and determining if it is covered under the policy. Each of these principles serves a different function within the framework of insurance but does not specifically aim at the idea of compensating