What is a "fidelity bond"?

A fidelity bond is indeed a type of insurance that protects businesses against losses resulting from employee dishonesty or fraud. This specialized coverage is essential for businesses, as it safeguards them from financial losses caused by actions such as theft, embezzlement, or forgery committed by employees. Fidelity bonds provide employers with the peace of mind that they are protected against internal risks that could severely impact their financial situation and operational integrity.

The protection offered by fidelity bonds is crucial, as employee dishonesty can lead to significant financial repercussions, and the bond acts as a safeguard to mitigate these risks. Many organizations utilize fidelity bonds as part of their risk management strategies to ensure that potential losses from dishonest acts are covered, allowing them to maintain trust with clients and stakeholders.

Other options mentioned do not align with the specific nature of a fidelity bond, focusing instead on different types of insurance and financial instruments, highlighting the importance of understanding the unique features and functions of various insurance products in the industry.