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An indemnity agreement provides protection against loss and is commonly required for high-risk activities like skydiving and bungee jumping to shield businesses from liability. In surety contexts, it is a signed document between a principal and a surety, stipulating that the principal will indemnify the surety if a claim arises. Indemnification involves compensating the surety for any payouts made, such as repaying a $20,000 claim. Most business owners are required to sign an indemnity agreement, which may sometimes necessitate spousal consent or third-party witness signatures for validity.
