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Introduction to Loss Prevention: Fidelity Bonds

Fidelity bonds protect an employer from financial loss due to dishonest acts of a covered employee. For a loss to be covered the employer must lose money and the employee must either obtain a financial benefit from the act. The loss can be the result of the employee's theft of money, securities, or other property of the insured. In general employee dishonesty policies are written on a blanket basis, so that all employees are covered.

Millions of dollars are lost every year due to employee dishonesty. Businesses suffer severe financial damage and can end up in bankruptcy. Some instances are one-time theft occurrences, but the large losses result from long-term, ongoing schemes that go undetected for months, and sometimes years. While a Homeowners Association doesn’t deal with the kind of funds multi-million dollar businesses have, the large reserve account balances make homeowners associations susceptible to fraudulent acts and monetary losses.

Property written, a fidelity bond covering a homeowners association has an endorsement which redefines the insured to include the board members as “non-compensated employees” of the Association. It is also especially important that an endorsement is added which extends coverage to the management agent.

1/3 of all employees admitted to stealing
from their employers in the previous year.



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