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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 the context of surety, 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 reimbursing the surety for any claims paid out. For instance, if a surety pays a $20,000 claim, the principal must repay that amount. Most business owners will need to sign an indemnity agreement, which may also involve spousal indemnity or third-party witness signatures in certain situations.
