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An indemnity agreement is a legal document that provides protection against loss, commonly required in high-risk activities like skydiving or bungee jumping to shield businesses from liability. In the context of surety, it involves a signed contract between a principal and a surety, stating that the principal will indemnify the surety in case of a claim. Indemnification means restoring the surety to its original position; for instance, if a surety pays out $20,000 on a claim, the principal must repay that amount. Most business owners will need to sign an indemnity agreement, which may sometimes also require spousal indemnity or third-party witness signatures.