What Is a General Indemnity Agreement & Why Do I Need One?
A General Indemnity Agreement, also called a GIA, is a signed contract between the surety company, the obligee, and the principal that outlines an agreement between the three parties. These protect the surety from loss and expenses following any claims against the bonds. GIAs are legally binding, and signers must abide by all the agreements and promises outlined. Most bond seekers will need to sign one of these agreements while securing their bond. Depending on the structure of the bonded company, there may be one or more principals required to sign the agreement, which typically includes business owners and spouses. Every individual with 10% or more ownership in the company will be required to sign on behalf of the company. Bonds that do not require a credit check or are lower-risk may not require the principal to sign an indemnity agreement, but this agreement is required for higher-risk bonds to ensure the principal repays the surety following a legitimate claims settlement.
General Indemnity Agreements are a normal part of the process for bond seekers, typically. For those unaccustomed to how sureties operate, these agreements can sometimes seem like a foreign language. Thankfully, our surety bond agents at The ProSure Group are here to teach you about General Indemnity Agreements and why you may be required to sign one.
Why Does My Spouse Have to Sign The GIA?
Spouses often may not be involved with the business, but a spouse signing a GIA is common for larger bond amounts. An example of this is obtaining a bank loan, which requires both parties to sign. Spouses often share assets, so by having both signatures, the surety company can ensure business owners will not transfer their assets into their spouse’s name to avoid repaying a claim against the surety.
What Happens If the Principal Doesn’t Repay the Surety?
A surety bond is similar to a line of credit in that it prevents the principal from tying up their own money. By signing an indemnity, liability for damages transfers from the surety to themselves. If a claim is filed and the principal is unwilling to repay the surety, the indemnity agreement allows the surety company to take legal action to collect repayment.
What Does a GIA Include?
Most General Indemnity Agreements include a basic representation of facts, which states you have requested the surety company to provide a bond and the principals have a beneficial interest in receiving the bond. Following this, the GIA addresses promises and agreements regarding bond issuance. These typically include the payment of premiums and losses incurred by the surety, reserve deposits, asset and record examinations, and other important items.