Short answer
An indemnity agreement is the contract you sign with the surety promising to repay it for any valid claim it pays on your bond, plus related costs. It is what makes a bond a guarantee rather than insurance, and for many bonds the business owners sign a personal guarantee. It is standard and required, not a sign of a problem.
Because a surety bond guarantees your obligation, the surety expects to be made whole if it has to pay a claim. The indemnity agreement is how that works: you agree to reimburse the surety for claims and costs. For closely held businesses, owners often sign personally as well, which is why credit and financials matter in underwriting.
Signing indemnity is routine for surety bonds. The way to avoid ever paying under it is to meet the obligation the bond guarantees, since claims only arise when the underlying duty is not met.
Related
Browse more questions and answers.