Glossary
Fidelity bond, defined
A form of employee dishonesty protection that pays an employer, or a client of the employer, when a worker steals money or property.
In practice
Two kinds. A first-party form covers the employer's own loss to theft by staff and is now usually sold as the employee theft part of a crime policy. A third-party form, sometimes called a business services bond, covers a client's loss when an employee of a cleaning firm, home care agency or contractor steals from the client's premises; clients and licensing boards often require it. It is not a surety bond: there is no principal promising performance, only a carrier paying for proven theft. Payment usually requires a conviction or at least clear evidence, and the form covers named employees or all employees depending on how it is written. Limits are per loss, and a deductible applies.
A worked example
Suppose a residential cleaning company holds a third-party form with a $25,000 limit per occurrence. A cleaner takes jewelry from a client's home and admits it. The client is paid $6,000 for the items after appraisal, and the company's $500 deductible applies. Hypothetical.
Applies to: Surety BondsBusiness Owners Policy (BOP)