Which term best describes a contract in which one party agrees to indemnify the other for specific losses?

The term that best describes a contract in which one party agrees to indemnify the other for specific losses is an indemnity contract. An indemnity contract specifically outlines the obligation of one party to compensate the other for losses incurred. This type of agreement is commonly used in various contexts, such as in business transactions, legal disputes, and insurance arrangements.

In an indemnity contract, the indemnifying party assumes the financial responsibility for certain specified risks or losses, providing a safety net for the other party. This clear understanding of the responsibilities and protections involved makes indemnity contracts a critical component in risk management, as they define the terms under which losses will be compensated.

Other options do not accurately capture this concept. A liability agreement may refer to a broader scope of liability issues but doesn’t specifically focus on the duty to indemnify for losses. An insurance policy, while related, typically involves risk coverage and compensation upon loss rather than an explicit indemnification agreement. A coverage agreement might suggest certain protections, but it lacks the specificity that defines an indemnity contract. Thus, the definition and purpose of an indemnity contract make it the best choice for this scenario.