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An indemnity agreement provides protection against loss, often required for 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, stating that the principal will indemnify the surety in the event of a claim. Indemnification involves compensating the surety for a payout; for instance, if a surety pays a claim of $20,000, the principal must repay that amount. Typically, all business owners sign indemnity agreements, with variations based on circumstances, such as requiring spousal indemnity or third-party witnesses for signatures.
