The Collaborative International Dictionary of English v.0.48:

Indemnify \In*dem"ni*fy\, v. t. [imp. & p. p. Indemnified; p.
   pr. & vb. n. Indemnifying.] [L. indemnis unhurt (in- not +
   damnum hurt, damage) + -fy. Cf. Damn, Damnify.]
   [1913 Webster]
   1. To save harmless; to secure against loss or damage; to
      insure.
      [1913 Webster]

            The states must at last engage to the merchants here
            that they will indemnify them from all that shall
            fall out.                             --Sir W.
                                                  Temple.
      [1913 Webster]

   2. To make restitution or compensation for, as for that which
      is lost; to make whole; to reimburse; to compensate.
      --Beattie.
      [1913 Webster]

WordNet (r) 3.0 (2006):

indemnify
    v 1: secure against future loss, damage, or liability; give
         security for; "This plan indemnifies workers against wages
         lost through illness"
    2: make amends for; pay compensation for; "One can never fully
       repair the suffering and losses of the Jews in the Third
       Reich"; "She was compensated for the loss of her arm in the
       accident" [syn: compensate, recompense, repair,
       indemnify]

Moby Thesaurus II by Grady Ward, 1.0:

44 Moby Thesaurus words for "indemnify":
   atone, compensate, cover, do penance, expiate, fee, fill up,
   get satisfaction, give and take, give satisfaction, guerdon,
   make amends, make compensation, make good, make reparation,
   make requital, make restitution, make retribution, make up for,
   pay, pay back, pay by installments, pay damages, pay off, pay on,
   prepay, quit, recompense, rectify, redress, refund, reimburse,
   remit, remunerate, render, repay, requite, retaliate, reward,
   salary, satisfy, set right, square, tender