Compensation Legal Meaning and Definition

Here is a simplified definition of the legal term Compensation.

Compensation (noun)

1. The payment that is given to a person in return for their work, services, or for a loss suffered. This can include wages, bonuses, allowances, and insurance benefits.

   Example: If a worker gets hurt on the job, the money paid to them for their injury is called workers' compensation.

2. The money paid by an insurance company to a policyholder after verifying that their claim of loss or damage is accurate and fits the terms of the policy.

   Example: If a person's house has fire damage, the amount they receive from their insurance company to cover the cost of this damage is also called compensation.