Indemnity Agreement (Surety)
A contract a surety requires a contractor, and often its owners personally, to sign before issuing a bond, agreeing to reimburse the surety for any losses it pays out on a bond claim. The surety's payment on a claim is effectively a loan the contractor and its indemnitors must repay, not free insurance.
Why it matters
Signing this agreement is easy to treat as routine paperwork on the way to getting bonded, but it often extends indemnification beyond the company itself to the owners personally, exposing personal assets to a bond claim years later, not just the business.
On a real project
A contractor's owner signs a surety's indemnity agreement as part of getting bonded for a large project, not realizing the agreement's personal indemnification clause means their own home and savings, not just the company, stand behind any future bond claim.
Who this matters most to
A Surety Bond Underwriter requires the indemnity agreement before issuing a bond, since it's what makes the surety's payout recoverable rather than an outright loss.
Where this goes wrong
A contractor's owner signs the surety's indemnity agreement without fully grasping it includes personal indemnification. A bond claim years later reaches into the owner's personal assets, not just the company's, to reimburse the surety for what it paid out.