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An indemnity agreement serves as a form of protection against loss, particularly in high-risk activities such as skydiving and bungee jumping, where businesses seek to limit their liability. It is a signed document between a principal and a surety, stating that the principal will indemnify the surety if a claim arises. Indemnification refers to the process of compensating for a loss; for instance, if a surety pays a claim of $20,000, the principal must repay that amount to the surety. Typically, all business owners must sign an indemnity agreement, though requirements may vary, with some needing spousal indemnity or a third-party witness for signatures.
