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An indemnity agreement provides protection against loss, commonly required in high-risk activities like skydiving and bungee jumping to shield businesses from liability. In surety bonding, an indemnity agreement is a signed document between a principal and a surety, stating that the principal will indemnify the surety for any claims. Indemnification involves compensating the surety for claims paid; for example, if a surety covers a $20,000 claim, the principal must repay that amount. Typically, all business owners must sign an indemnity agreement, although sometimes only top applicants need to, and other cases may require spousal indemnity or a third-party witness for signatures.
