Nobody wants to believe that their organization harbors someone willing to commit theft or fraud, however you don’t buy insurance for what you hope happens, but to protect against your worst fears. And an employee defrauding or performing other dishonest actions against either your organization (or your clients) should send a shiver down your spine, as it could leave you on the hook for millions—unless you have the right type of insurance.
Although the term “fidelity bond” sounds like an investment term, it actually describes a specialized type of insurance that covers dishonest and fraudulent acts committed by an employee (or a member of an organization). Common acts covered include theft or fraud committed by an individual, with the victim being either the organization or its clients.
Again, despite the word “bond” in the name, fidelity bonds are a type of specialized insurance and have no relation to the type of bonds traded on the market.
Like many other types of insurance, fidelity bonds come in different varieties in order to give you a choice of what’s covered and to what limit. Broadly speaking, most of these fidelity bonds fall into three categories:
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