Bonds are generally divided into two types, Fidelity Bonds and Surety Bonds. Both
types differ from insurance in that they always have three parties as central to
the contract: a Principal (the entity or person that might cause the loss), an Obligee
(the entity that collects under the bond, should the principal cause a loss) and
a Surety (the entity that pays the loss, such as an insurance company).
Fidelity Bonds
Fidelity Bonds are technically a form of Surety Bonds, but are usually considered
a distinct product in common usage. They are issued as a guarantee against loss
due to employee dishonesty. As such, they are an important part of a companies insurance
program, because they cover areas not covered in the companies Liability and Property
coverage. For many businesses, employee's dishonest acts are a principal area of
their insurable risks, and Fidelity Bonds can provide their principal insurance
protection.
Fidelity Bonds come in several forms, including:
Individual Bonds--in which an individual employee is bonded. Individual
Bonds are not standardized. They can be most easily used for unusual situations
or activities, and can most easily be specially scripted.
Scheduled Bonds--in which individual positions (called a Positions
Schedule Bond) or named individuals (called a Name Schedule Bond) are covered, for
example all branch personnel in a bank, or all tellers.
Blanket Bonds--Used to cover all employees, and thus provide the
most complete coverage of the three types. The coverage is especially valuable because
of the latitude given in demonstrating a covered loss. The employer doesn't need
to show that a specific covered employee caused a loss. If the employer can show
that an employee must have caused the loss--that it was an inside job!--then coverage
will be provided.
Discovery Bonds--An important extension of the Fidelity Bond types.
A Discovery Bond allows a first-time buyer of Fidelity Bonds to protect against
undiscovered loss that occurred before the bond was issued. If you, as employer,
have just realized the need for a Fidelity Bond as part of your insurance coverage,
you should also consider buying Discovery period coverage.
Surety Bonds
Surety bonds are issued to cover an extremely wide range of actions and situations.
They are issued by surety companies, and can be classified into one of the following
areas:
Contract Bonds
Court Bonds
Federal Bonds
License and Permit Bonds
Public Official Bonds
Other/Miscellaneous Bonds
Other forms of Surety Available
License Bonds
Lost Instument Bonds
ERISA Bonds
Probate Bonds
Builders Risk Bonds
Click here to apply for this type of coverage
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