The principle that aims to restore an insured's financial position after a loss is known as?

The principle that aims to restore an insured's financial position after a loss is known as indemnity. This principle ensures that a policyholder receives compensation for their loss up to the limits set in their insurance policy, effectively placing them back in the same financial position they were in prior to the loss. Indemnity is fundamental to insurance, preventing any form of profit from a claim and ensuring that compensation is fair and proportionate to the loss experienced.

In this context, subrogation refers to the insurer's right to seek reimbursement from a third party responsible for the loss after compensating the insured. Liability involves the responsibility one holds for causing harm or damage to another party, while depreciation accounts for the reduction in value of an item over time. However, none of these concepts directly address the restoration of the insured's financial position as a result of a loss, which is why indemnity is the correct choice.