A fidelity bond is a form of business insurance to protect employers from loss of money or property incurred as a result of hiring high-risk employees. A worker who is bonded by the fidelity bond is called a covered employee. The fidelity bond protects an employer against theft, larceny, or embezzlement committed by a covered employee. It is a program which helps employers to hire people with little risk and is beneficial to unemployed personnel as well since they can find gainful employment.
Fidelity Bonding Program offers the employer a guarantee against losses up to $25,000 and the bond expires after six months. The bond becomes effective from the employee’s first day of employment and coverage is based on the value of the property at risk. Fidelity bonds offer 100% coverage and have no deductibles. However, fidelity bond does not cover certain aspects such as liability due to poor workmanship, job injuries, or work accidents.
Fidelity bonds are issued in increments of $5,000, and the employer must justify the need for additional bonding if the bond coverage exceeds $5,000 by including a statement in the offer of employment letter to justify the need for a higher bond.