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An indemnity agreement is linked to the concept of indemnity, which means protection against loss. It is commonly used in high-risk activities like skydiving or bungee jumping to protect businesses from liability. In surety, an indemnity agreement is a document signed between a principal and a surety, stating that the principal will reimburse the surety in case a claim arises. Indemnification refers to the process of making the surety whole again; for instance, if the surety pays a claim of $20,000, the principal must repay that amount. Typically, all business owners are required to sign an indemnity agreement, though sometimes only certain applicants or additional parties like spouses may need to sign.
