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An indemnity agreement provides protection against loss, commonly required for high-risk activities like skydiving and bungee jumping to safeguard businesses from liability. In the context of surety, it is a document between a principal and a surety, where the principal agrees to indemnify the surety in the event of a claim. Indemnification refers to the process of compensating for a loss, such as when a surety pays a claim of $20,000 and the principal must repay that amount. Most business owners are required to sign an indemnity agreement, which may sometimes necessitate a spousal indemnity or a third-party witness to the signatures.