Which term refers to financial coverage provided for potential future claims?

The term that refers to financial coverage provided for potential future claims is indemnity. Indemnity is a principle in insurance that ensures a policyholder is compensated for a covered loss, bringing them back to the financial state they were in prior to the incident. This means that if a claim occurs, the insurance company will cover the loss, fulfilling its promise to protect the policyholder from financial hardship due to unforeseen events.

In the context of insurance, indemnity serves to mitigate the risk faced by individuals and businesses. It allows policyholders to feel secure knowing they have financial backing in case of accidents, damages, or other liabilities. This concept is foundational to how many insurance products operate, ensuring that coverage extends to future claims that could arise from various risks.

While other terms like endorsement, premium, and liability are related to insurance, they do not specifically denote the coverage for potential future claims in the same way that indemnity does. An endorsement typically modifies or adds to the existing coverage, a premium is the amount paid for the policy, and liability refers to legal responsibilities, rather than coverage for future claims directly.