Property and Casualty Insurance Practice Exam

Which type of bond protects against dishonest acts by employees?

1. Surety Bond

2. Fidelity Bond

3. Performance Bond

4. Commercial Bond

The correct answer is: Fidelity Bond

The correct answer is fidelity bond, which is specifically designed to protect businesses from losses that may occur due to the dishonest actions of their employees, such as theft or fraud. It provides financial compensation for the employer if an employee commits an act of dishonesty that results in a monetary loss. Fidelity bonds are important for organizations because they serve as a safeguard against the risks associated with employee misconduct, thereby promoting trust and security within the workplace. Other types of bonds serve different purposes: a surety bond is typically used to guarantee that an obligation or contract will be fulfilled, often seen in construction projects; a performance bond ensures that a contractor completes a project according to the contract specifications; and a commercial bond usually involves licensing and permits for businesses to operate legally. Each of these bonds supports different aspects of business operations, but they do not offer the same direct protection against employee dishonesty that fidelity bonds do.