A fidelity bond is a type of insurance that indemnifies the insured for loss caused
by the dishonest or fraudulent acts of its employees. In addition, the fidelity bond
typically covers the insured against: forgery or alteration; loss inside the premises
caused by theft, disappearance and destruction, and
robbery and safe burglary; and loss outside the premises caused by the robbery of
a messenger. The fidelity bond covers only losses incurred by the insured, and claims
may be made under the policy only by the insured and paid to the insured. These policies
do not cover losses caused by owners or partners of the insured.
NOTE: If this bond is secured, a separate rider or additional bond is required to cover
There are two types of fidelity bonds:
Blanket Bond – bond that guarantees the honesty of all employees of an entity up to the stated
amount of the bond.
Schedule Bond – bond that guarantees the honesty of only named employees of an entity up to the
stated amount of the bond.
An employee dishonesty bond is usually a blanket bond covering all company employees
except officers (unless specifically mentioned in a separate rider). For dishonesty
bonds of high amounts, the surety company may require the bond-holder to have certain
loss prevention procedures in place, such as:
countersignature procedures for check signing;
audits by a Certified Public Accountant or an independent financial examiner, performed
at least annually;
bank account reconciliation by someone not authorized to deposit or withdraw from
employee discharge notification from an employer and reason for discharge or separation;
joint handling of any securities.