Why are Personal Accident (PA) insurance contracts not considered contracts of indemnity?

Personal Accident (PA) insurance contracts are not classified as contracts of indemnity primarily because they provide a fixed sum benefit upon the occurrence of an accident, regardless of the actual financial loss incurred by the policyholder. This means that the payout does not directly correlate with the policyholder's loss, which is a fundamental characteristic of traditional indemnity contracts, where the goal is to restore the insured to their pre-loss financial position.

With PA insurance, the insured receives a predetermined amount that is agreed upon at the time of purchasing the policy, based on the terms and conditions specified in the contract. This can include benefits for accidental death or permanent disablement, among others, and does not consider the actual expenses or losses suffered as a result of the accident. Consequently, since there's no requirement to prove the extent of the loss, the benefits are fixed and not related to the damage or loss in monetary terms, solidifying their classification outside of indemnity contracts.