Which term refers to the financial loss covered by insurance to restore the original state of a subject matter?

The term that refers to the financial loss covered by insurance to restore the original state of a subject matter is indemnity. Indemnity is a fundamental principle in insurance, ensuring that the insured party is compensated for their loss in a way that restores them to their pre-loss condition, without creating a profit from the insurance claim. This aligns with the notion of indemnification, where the insurer reimburses the insured for the actual losses incurred, rather than granting an amount that could exceed the cost of the loss.

Depreciation relates to the reduction in value of an asset over time and does not pertain to the insurance coverage of financial loss. Exclusion is a term that describes specific conditions or instances which are not covered by an insurance policy. Underinsurance refers to a situation where the coverage amount is insufficient to completely cover the loss, which contradicts the purpose of indemnity to fully restore the insured's prior state.