You may need to define indemnitor when you're working with contracts or bonds.

What Is an Indemnitor?

An indemnitor is a company or person agreeing to take on the obligation that would typically be placed on a surety if an individual defaults on a bond issued to him. If the applicant doesn't qualify for reasons of risk by the standards of the surety, an indemnitor might be necessary for the bond process. Many people mix up the words “indemnitor” and “indemnitee,” which can cause confusion.

When a contract specifies that either of the involved parties could be subject to indemnification claims, it's important to understand the differences between indemnitor and indemnitee. These can't be replaced with standard alternatives for defined terms in the party name.

You could use the phrase “indemnifying party,” but using “indemnified party” sounds awkward because it's standard procedure for a given party and also its representatives and affiliates to be entitled to indemnification. Describing all members of the broader groups as “parties” would make the documentation more confusing.

An indemnitor, also called a guarantor, is a person or group of people agreeing to cosign for the bail bond of a defendant through a company that offers bail bonds, such as an underwriter or agent. The process of cosigning on a bond is referred to as indemnification. By cosigning, the indemnitor takes responsibility for the repayment of the amount owed to the bail bond agent if the defendant skips bail or fails to appear when required to be in court. An indemnitor is usually a coworker, family member, or friend of the defendant.

Before someone is eligible to cosign for a bail bond, the agency will ask certain questions to make sure they are financially liable for the bond. This process might include running a credit check to verify the answers provided by the potential indemnitor. Upon approval, the indemnitor will meet with the agent at the bail bond company, complete all required documents, and pay any necessary fees. The final step in the process is bailing the defendant out of jail.

In order to qualify as a cosigner or indemnitor, an individual or group must show proof of their financial capability to repay the full bond amount. This would be required if the defendant doesn't meet the obligations. The indemnitor assumes the financial liability for the amount of the bond until the defendant is either sentenced on or exonerated of all charges.

What Is Surety Bond Indemnity?

A licensed bonding company can provide surety bonds for many business-related purposes, such as obtaining a permit or business license. If the licensed bonding company is willing to grant a surety bond for your company, this usually will require protection from any loss. 

The protection from loss is called a surety bond indemnity. The amount and type of your bond will depend on whether a surety bond is required. Depending on the amount, the company might require you, your business partners, and/or your spouse to submit surety bond indemnity as well.

Obtaining a business surety bond requires the involvement of three parties:

  • The beneficiary, which is the government agency or other related party requiring the bond
  • The principal, which is your business
  • The underwriter, which is the company that issues the bond

These three parties are required, although you may have a fourth involved party. This party is called the indemnitor. The indemnitor's role is to cover all losses incurred by the underwriter on the bond. These might include attorney fees, court costs, or unpaid premiums. The underwriter, or bond-issuing company, will set requirements for indemnification of the surety bond.

Most bonding companies require indemnitors to have a positive business reputation in the community and meet specific financial requirements. The underwriter may also require you and other people involved in your business, or the business itself, to serve as indemnitors. The other people involved in your company might include the chief executive officer or president. For incorporated businesses, the majority shareholder might also need to serve as an indemnitor.

Agreements for surety bond indemnity are always done in writing. Many companies will include the agreement as part of the application you fill out to obtain a surety bond for your business. However, some companies only require the indemnitor to sign the document.

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