Definition of Fidelity Bonds
Society has an interest in rehabilitating those who have recently been released from prisons, rehab facilities and halfway houses. But employers are understandably reluctant to hire those whose backgrounds contain legal or behavioral issues that could potentially spill over into the workplace. A fidelity bond is a form of insurance policy that protects employers against damages caused by theft, sabotage, vandalism, fraud or similar behaviors by their employees.
Other People Are Reading
-
Purpose
-
The purpose of a fidelity bond is to encourage employers to hire workers who come from high-risk populations. The presence of a fidelity bond takes much of the financial risk off of the shoulders of the individual business owner -- who cannot afford to bear the risk -- and transfers it to the capital markets, which can.
History
-
In their modern form, fidelity bonds came about as a result of The Federal Bonding Program, a U.S. Department of Labor initiative in 1966. Currently, the Department of Labor works with the McLaughlin Group, promoting the issuance of fidelity bonds underwritten by the Travelers Companies, Inc., a prominent U.S. insurance company.
-
Coverage
-
A fidelity bond provides a cash payment of up to $25,000 to an employer as an indemnity against any acts of theft, fraud, embezzlement or any other act of dishonesty committed by a bonded employee. Minimum coverage under the Federal Bonding Program is $5,000. The coverage is provided for up to six months, free of charge to the employer. Employers can extend that coverage by paying an additional premium.
Exemptions
-
Fidelity bonds only cover acts of employee dishonesty. They do not cover problems with workmanship or human error, nor do they cover any losses the employer incurs as a result of posting bail for an employee who gets arrested and fails to show for his hearing. The Federal Bonding Progam does not cover the self-employed.
-
