Texas General Lines — Property and CasualtySurety and BondsEasy
A client, Mr. Henderson, operates a small accounting firm. He is concerned about potential financial losses if one of his employees were to embezzle funds from a client's account. He wants to purchase a bond that would protect his firm against such acts of dishonesty by an employee. Which type of bond should Mr. Henderson seek?
- ASurety Bond
- BPermit Bond
- CFidelity Bond
- DContract Bond
Show answer & explanationAnswer & explanation
Correct answer: C. Fidelity Bond
A Fidelity Bond is specifically designed to protect an employer from financial losses due to dishonest acts, theft, or embezzlement by employees. This directly addresses Mr. Henderson's concern.
Why the other options are wrong
- A. Surety bond is a broad category, not the specific type needed here.
- B. Permit bonds ensure compliance with regulations for a specific permit.
- D. Contract bonds guarantee performance of a contract, not employee honesty.
Fidelity Bond
A type of bond that protects an employer from losses caused by the dishonest acts of employees.
- Covers acts like theft, fraud, embezzlement by employees.
- Employer is the obligee, employee is the principal, insurer is the surety.
- Can be individual, schedule, or blanket bonds.
Memory trick: Fidelity: Faith in employees, protection if it breaks.