To understand the agreement it looks better to know indemnity first. By the definition, the term indemnity means the responsibility to make available a compensation for a particular damage or loss. In fact, it is a way to secure against different kinds of loss and damage that can be done any other party.
What is an Indemnity Agreement?
An indemnity agreement is a legal document that identifies the financial responsibility of persons. This agreement is often observed by the companies to their directors and officers. It is actually a risk transfer mechanism that assures the compensation for Indemnitee (the person who suffers a loss) by the Indemnitor (the person responsible for paying compensation). Different types of insurance contracts are also a type of indemnity agreements. It is a quite good practice to make such agreements to define financial responsibilities clearly.
The indemnity agreement ensures the protection for Indemnitee and reduces the effect of any risk. Indemnity agreement of directors and officers with their companies enables them to be indemnified for any expenses and liabilities during the proceedings as an officer or director of the company. It can be a medical insurance, construction insurance any other such compensation that transfers the financial responsibility for a particular task or responsibility to another person.
The indemnity agreement should be written in a proper format. The agreement must be headed with the company name and next to it the title of the indemnity agreement. In the first paragraph, it must be declared that indemnification agreement is going to make between the company (Full name and address of the company) and the employee (add a name, full address and designation). Date of agreement signing and being effective must also be mentioned clearly. In the next paragraph, all the important issues and clauses should be addressed clearly. At the end of the document, it must be signed by both, the Indemnitor and Indemnitee.
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