Indemnification basket

Definition

The losses a buyer absorbs before any claim can be made at all.

Why It Matters

It sets how much post-close risk you absorb yourself before the seller's promises pay out, and the mechanism matters as much as the number. A true deductible pays only the losses above the threshold, while a tipping basket pays from the first dollar once the threshold is crossed, and on the same figure those two are a materially different deal. Negotiate the type and the cap together, since a low basket under a low cap protects far less than either number suggests alone.

In numbers: On a $4M deal with a 0.75% basket, the buyer absorbs the first $30,000 of claims before any indemnification is owed.