50+ Sample Indemnity Agreement Templates

What Is an Indemnity Agreement?

You often hear the word ‘indemnity’ in talking about insurance or compensation. But what exactly is it? To prevent confusion, Investopedia introduces us to two meanings of indemnity. First, indemnity refers to security—which compensates any damage or loss. On another note, indemnity exempts any business or party from any liability for damage. And the indemnification, aka hold harmless, must be spelled out in a written form of agreement or contract. Thus, an indemnity agreement binds two parties to settle terms on how risks, losses, and damages are compensated.

Did you know that the insurance industry in the US had a net premium total of $1.22 trillion in 2018?

According to Statista, more than half of the UK warranty and indemnity insurance (W&I) was caused by a tax breach in 2009–2019.

Also, Reuters mentioned that Congress mandated $1 billion to confront the bird flu epidemic, which affected the US poultry business between 2014 and 2015. And, the US Department of Agriculture (USDA) gave $600 million to fight the virus and $200 million indemnity payments.

Why Is an Indemnity Agreement Important?

Indemnity agreements and clauses are standard in business for a series of reasons. First, the written agreement outlines every term in which parties must comply. And since parties sign the form, the agreement takes effect as regulated. For example, a car insurance company is already obligated to pay for a client’s vehicle engine damage if covering the cost has been written under the document. And every party can look back in the form to be reminded about the regulations and corresponding duties.

Also, the indemnity agreement helps in settling legal action. What if one party commits a breach of contract? If the person who committed the offense refused to do the consequences promised in the agreement, then the obedient party can file for litigation. And that obedient party would win the case if the consequences for breaching were stipulated clearly in the form. The point is indemnity agreements prevent issues regarding liability exemptions or insurance compensations.

Who Creates the Indemnity Agreement?

Indemnification commonly involves an agreement between a person and a business. Also, it can work between companies, government entities, and more if relationships are between a bigger scale. But one thing is sure—indemnity agreement consists of the indemnitee and the indemnifier. The indemnitee refers to the individual or business protected from particular liabilities. Meanwhile, an indemnifier is the designated party to reimburse an indemnitee for specific claims. If you base the example between the skydiving example discussed earlier, the skydiving business is the indemnitee, and the skydiver or customer is the indemnifier.

When to Apply the Indemnity Agreement

You already know indemnity agreements authorize protection from any possible damage, liability, loss, or claim in the involvement of a particular event or activity. But what are other examples of when to use the agreement? Aside from skydiving, a bunch of businesses depends on indemnification for security purposes as well. Here are some examples of when to use indemnity agreements:

Employment: A hold harmless agreement is common in employment contracts. Employers and employees would talk about the workers’ compensation, health insurance, separation agreement, and other related concerns similar to indemnity. Otherwise, there might be a liability battle between the manager and the employee when damages occur at work.Apartment Rental: When a landlord welcomes a new tenant to an apartment, the landlord may ask the tenant to sign an indemnity agreement first. So if tenants commit property damages during the rental period, then the landlord deserves payment from such tenants to compensate.Car Rental: On another side of rentals, auto rental companies depend on indemnification for protection too. Some reckless drivers use a car on rental out there. And in case these drivers get into accidents, the rental business is protected against lawsuits if the indemnity stipulated in the auto contract was signed.Construction: Any contractor or subcontractor could face potentially dangerous activities, particularly in the construction industry. Who knows a contractor might face injuries due to negligence? And hospital fees can be costly. More so, when many workers with serious injuries are involved. Hence, construction companies encourage such contractors to sign the indemnity agreement for security.Pet Shelter: Pet shelters and kennels are very helpful when clients need their pets to stay at a temporary home for the night. But sometimes animals can be wild that pets could harm each other during the stay, especially if the animals were poorly monitored. So, an indemnity agreement letter can settle that mess.Surety Bond: A surety or guarantor is obliged to cover for someone’s debt if that debtor cannot fulfill his or her financial responsibilities. And to be safe from possible surety bond claims and losses, surety businesses better encourage obligees to sign indemnity agreements.Risky Activities: Back to skydiving, other fun activities are quite risky like parasailing, zip line courses, skiing—you name it. So, of course, whoever runs these activities should prepare hold harmless agreement forms if anything bad happens to their clients. But to be fair, such companies will ensure safety protocols at all costs to prevent horrible incidents that might close the business.

How to Make an Indemnity Agreement

In America, the insurance industry dominated in 2018 with a net premium total of $1.22 trillion. That is, according to the Insurance Information Institute. With that massive amount, you can say that lots of people and businesses depend on insurance for security and protection. And just like insurance, indemnity is relevant to prepare for future circumstances of liabilities, damages, and losses. But, that protection might not last without a well-thought-out indemnity agreement. So be sure to know the steps on how to create the indemnity agreement with these steps:

Step 1: Open with an Introductory Statement

First things first, the indemnity agreement label should be clear on top of your agreement form. Using bold capital letters will do. That title or label indicates that the document is about indemnity. And while the title is already clear, start with the introductory statement. From the name itself, introductory statements introduce significant details of the indemnity agreement. It should include when the deal begins to take effect as well as when it ends.

Step 2: Identify All the Parties

Another critical part of the introduction is the party information. Who are the indemnifier and the indemnitee? Note it down. Be clear with the parties’ names and their roles to prevent confusion. And inputting the full and legal names of parties is standard. Remember that writing the wrong names and information can nullify the whole agreement, and you would not want that. Aside from the names, you may need to include everyone’s contact info.

Step 3: Stipulate the Terms

Next, it’s time to face the most challenging part of the agreement?—incorporating the rules, policies, and legal terms. And every detail must be correct from the terms, or the entire message might mean differently. Decide what to agree regarding the indemnified activities, considerations, consent, confidentiality, legal fees, severability, representations, warranties, amendments, waivers, and the governing law.

Step 4: Be Specific

Review everything you have written if they are clear and understandable enough. As it is standard to always correct misspellings and grammatical errors in official forms, your next problem might have something to do with broadness. With this, it means your words and messages might not be specific enough. For example, you might have stated that “the indemnitee seeks protection from indemnified activities.” So what are these indemnified activities? Enumerate them. And are there exemptions from what activities are indemnified? State them as well.

Step 5: Insert the Termination or Dispute Clause

Complete your indemnity agreement with the dispute and termination clause. This section is vital in clarifying what to do in case parties fail to observe the stipulations under the agreement. For example, in the UK, there were more than half of the W&I caused by a tax breach back in 2009–2019. Thus, any breach can be solved instead of blaming who’s liable with the dispute clause. So, what circumstances cut the agreement’s validity aside from the agreement deadline? Include them in the document. And at the bottommost part of the sheet, provide blanks for the indemnitee and the indemnifier’s signature. Those signatures confirm that everybody has read, understood, and agreed on everything.


How does indemnity work?

An example of how indemnity works is the true story behind how government entities, businesses, and a whole industry managed a disease outbreak. According to Reuters, the US poultry industry suffered back in 2014 and 2015 because of bird flu. So, Congress mandated around $1 billion to support in stopping the virus. And while USDA gave approximately $600 million to stop bird flu, there was also protection given of about $200 million indemnity payments. Thus, poultry businesses were compensated.

What are the other names of indemnity agreements?

An indemnity agreement can often be associated with many names, but the meanings are just about the same. Examples include the hold harmless agreement, no-fault agreement, release of liability, and waiver of liability.

Should indemnity agreements be created equal?

No. Although you can keep the conditions fair for both sides in an indemnity agreement, there is no rule that this agreement should be created equally. And if the indemnifier feels that the conditions are unfair, simply choose not to sign the form. Nonetheless, always understand the agreement before you sign.

While an indemnity agreement’s function is already clear to you, don’t forget that making that binding agreement is not as basic as to excuse yourself from any liability. Various aspects are considered too. Moreover, you should be careful with every word, detail, and thought inputted in the form because the terms must be reasonable, legal, or ethical. Otherwise, your agreement might not be taken seriously. And with the help of our ready-made sample templates, you are guided on how to structure an excellent indemnity agreement easily.