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An indemnity agreement is a legal document that provides protection against loss. It is commonly required in high-risk activities, such as skydiving and bungee jumping, to shield businesses from liability. In the context of surety, the agreement is between a principal and a surety, outlining that the principal will compensate the surety if a claim arises. Indemnification refers to the process of restoring the surety to its original position after a payout. For instance, if a surety pays a claim of $20,000, the principal must reimburse the surety the same amount. Most business owners will need to sign an indemnity agreement, which may also involve spousal consent or third-party witnesses.
