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An indemnity agreement provides protection against loss, particularly in high-risk activities like skydiving and bungee jumping, where businesses seek to limit their liability. It involves a signed document between a principal and a surety, ensuring that the principal will indemnify the surety in case a claim arises. Indemnification means restoring the surety to its original position; for instance, if a surety pays $20,000 on a claim, the principal must reimburse that amount. Typically, business owners are required to sign an indemnity agreement, though sometimes only the best applicants need to sign, and in some instances, spousal indemnification or third-party witnesses may be necessary.
