Fidelity bond

Insurance coverage against losses due to employee dishonesty. Brokerage firms are required to carry such protection in proportion to their net capital as defined by the Securities and Exchange Commission. Contingencies covered include securities loss, forgery, and fraudulent trading. Also called blanket bond.

Coverage that guarantees that the insurance company will pay the insured business or individual for money or other property lost because of dishonest acts of its bonded employees, either named or by positions. The bond covers all dishonest acts, such as larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, or willful misapplication, whether employees act alone or as a team. Businesses often bond their employees not only because the insurance will pay for the losses, but also because the bonding company may prevent losses by uncovering dishonesty in the work history of a new employee. Since a fidelity bond makes up only a part of protection against theft, other crime insurance is mandatory. Employee dishonesty insurance is usually bought through an individual Fidelity Bond, Blanket Position Bond, Commercial Blanket Bond or a Name Schedule Bond.

An assurance, generally purchased by an employer, to cover employees who are entrusted with valuable property or funds.
Example: A landlord employs a resident manager who, among other duties, collects the Rent. To safeguard these funds during the collection process, the landlord purchases a fidelity bond on the resident manager.

An insurance device in the form of a personal guaranty that protects against loss resulting from disreputable or disloyal employees or other individuals who possess positions of confidence.

A bank might, for example, insure itself against losses deliberately or negligently caused by their officers and staff through the execution of a fidelity bond. If such losses occur, the amount of the bond is forfeited to reimburse the losses.

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A fidelity bond is a form of protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.

While called bonds, these obligations to protect an employer from employee-dishonesty losses are really insurance policies^[1]. These insurance policies protect from losses of company monies, securities, and other property from employees who have a manifest intent to cause the company loss. There are also many other forms of crime-insurance policies (burglary, fire, general theft, computer theft, disappearance, fraud, forgery, etc.) to protect company assets.

References

1. ^ "Fidelity Bond". Bryant Surety Bonds. http://www.bryantsuretybonds.com/Surety_Bonds/Commercial_Surety_Bonds/Fidelity_Bond.html. Retrieved on 2009-04-01. 

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