Final answer:
Indemnification is the term for compensating individuals only up to the value of their loss, commonly used in insurance to restore financial position without profit.
Step-by-step explanation:
The term that refers to compensating individuals only up to the value of their loss is indemnification. In the context of insurance, indemnification is a method used to protect a person from financial loss. Policy holders make regular payments, called premiums, to an insurance entity. Subsequently, if these policy holders suffer a financial damage from an event covered by the policy, the insurance firm remunerates them. However, the payment is meant to restore the individual to the financial position they were in before the loss, no more. This principle ensures that insurance does not become a source of profit but merely a way to cover losses, preventing the issue of moral hazard, where people may take greater risks because they are insured.