What type of bond protects policyholders against losses from fraudulent actions by specific individuals, typically employees?

A Fidelity Bond is specifically designed to protect policyholders from losses that may occur due to fraudulent actions committed by particular individuals, most often employees. This type of bond ensures that if an employee misappropriates funds or engages in dishonest behavior that causes financial loss to the employer or client, the bond will cover those losses.

Fidelity bonds can be particularly crucial for businesses that handle large sums of money or sensitive financial transactions, providing an added layer of security against internal threats. Organizations often purchase fidelity bonds to reassure clients and stakeholders that they are protected against potential financial misconduct by employees.

In contrast, liability insurance provides coverage for claims resulting from injuries or damages to third parties but does not specifically address fraud committed by employees. Surety bonds guarantee the performance of a contractor or obligation, ensuring that their work meets certain standards, but they do not cover fraud. Performance bonds are designed to ensure a contractor completes a job as agreed but, like surety bonds, they do not provide protection against fraudulent actions.