A fidelity guarantee, also known as a fidelity bond or fidelity insurance, is an insurance policy that protects a business owner against losses that occur as a result of fraudulent acts by employees. For a business owner to get money from a fidelity guarantee, he or she must prove the employees directly intended to take money from the business and that it was not a mistake. Most insurance policies also require that employees be tried and convicted of theft or embezzlement before the loss will be paid back. Fidelity insurance can be taken out for all employees or on an individual basis.
Internal theft, when one or more employees seek to take money from a business illegally, is not entirely common, but it can be a concern for many business owners. It can be as simple as stealing from a cash register or as advanced as forging the ledgers to make it seem as if no money is being stolen. Unlike many burglary and criminal insurance policies, which cover external theft, a fidelity guarantee is meant exclusively for internal theft.
One important aspect that most fidelity guarantee policies require is that the employee steals money intentionally. For example, if the employee was supposed to drop off money at the bank but forgot and left the money in his or her car, this is unintentional theft and usually will be fixed between the business owner and employee without any losses. This ensures that the business owner does not get unfair compensation.
Most fidelity guarantee policies also refuse to compensate for internal losses unless the employee is charged in court. This allows a jury to determine whether the internal theft is legitimate and what the guilty party is responsible for if found guilty. By going through the court system, the fidelity insurance company will know exactly how much should be paid to the business owner.
Such insurance comes in one of two forms. A business owner can take out a blanket policy, which covers every employee; under this policy, regardless of who internally steals from the business, the business owner will be covered. If there are few employees or the business owner distrusts one or several people, then he or she can get individual coverage, meaning that a policy is taken out for each employee individually. These policies are generally cheaper and may cover more per person, so they may be good for managers and other employees who are in a position to steal the most.
