Legal Definitions - fidelity insurance

Fidelity insurance is a type of insurance policy that protects an employer from financial losses caused by the dishonest acts of their employees. These acts can include theft, embezzlement, forgery, or other fraudulent activities committed by an employee against the employer.

It essentially provides coverage for losses that result from employee dishonesty, safeguarding the company's assets and financial stability.

• Example 1: Retail Store Embezzlement

  A regional electronics retailer discovers that one of its long-term store managers has been systematically creating fake refund transactions and pocketing the cash over several months, totaling $50,000. The retailer's fidelity insurance policy would cover the financial loss incurred due to the manager's embezzlement, allowing the company to recover the stolen funds.

• Example 2: Financial Advisor Fraud

  An independent financial advisory firm employs several advisors who manage client portfolios. One advisor, without the firm's knowledge, secretly diverts a significant portion of a client's investment funds into a personal offshore account. The firm's fidelity insurance would activate to compensate the firm for the financial damage caused by the advisor's fraudulent activity, protecting the firm from the direct loss and potential liability to the client.

• Example 3: Non-Profit Organization Theft

  A local charity organization relies on donations and grants to fund its community programs. The organization's administrative assistant, who handles incoming checks and manages petty cash, begins to regularly steal small amounts of cash donations before they are deposited and forges signatures on checks for personal use. The charity's fidelity insurance policy would cover the cumulative financial losses resulting from the assistant's ongoing theft and forgery, ensuring the organization can continue its mission without significant financial disruption.