Definition of Fidelity Bond
A Fidelity Bond is a form of insurance 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.
Purpose of Fidelity Bonds
The primary purpose of a fidelity bond is to provide protection against losses from employee theft, fraud, embezzlement, or any other dishonest actions. This type of insurance is crucial for businesses that handle cash or valuable assets or that grant employees access to sensitive financial information.
Coverage Details
Fidelity bonds may cover financial losses resulting from:
- Theft of money, securities, or other properties by an employee.
- Fraudulent transfer of funds.
- Forgery or alteration of documents such as checks or promissory notes.
Often included in commercial crime insurance policies, fidelity bonds play an essential role in mitigating risks associated with potentially dishonest employees and ensuring financial security for a business.
References and Further Reading
For further details, refer to:
- U.S. Department of Labor: The Handbook for Employer’s Guide to Fidelity Bonds (PDF)
- Types of Business Insurance | Small Business Administration
These documents provide detailed information on the regulations and guiding principles for fidelity bonds under various Acts like The Employee Retirement Income Security Act of 1974 (ERISA).
