Indemnity is a kind of washing your hands off when something goes wrong. When the principal or the contractor defaults or is responsible for breaching of the bonded agreement then the whole onus comes on the head of the surety. But if surety has signed an indemnity contract to protect surety then the losses will not have to be borne by the surety.
The relationship of a principal and surety is a very close one and it takes a long and tedious process to trust a principal. But, if both the parties work in harmony then this relationship can be a really long term relationship. The terms and conditions of surety are not written anywhere but they are just understood and followed. Just in case the trustworthy contractor fails to perform his duties as per the agreement then the whole liability of paying the remaining amount and everything else will come on the surety.
To prevent this kind of unpleasant situation from arising the surety must sign indemnity contract to protect surety. This contract favors the surety in case there is any default on the behalf of the contractor.
The basic difference between surety and any other kind of insurance is that the insurance companies bear the loss if the contractor fails but the surety will avoid bearing any kind of loss whatsoever. This indemnity contract will keep the surety safe by waiving off any liability whatsoever from the head of the surety. This insurance is a boon to the surety.
Indemnity Contract to Protect Surety 2, 10.0 out of 10 based on 2 ratings