Fidelity Insurance

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What is Fidelity Insurance?

A business can suffer huge losses due to a breach of trust by its employees. The fidelity guarantee insurance meaning is quite simple. It is an insurance policy designed to protect your business against pecuniary losses due to fraud, theft, or any other dishonest acts committed by employees. E.g., theft of cash, theft of inventory, online banking fraud, etc.

Fidelity Insurance covers losses that took place during the policy's time frame. Fraud committed and found during the coverage period should have the losses covered by the policy.

what is fidelity insurance

What are the Types of Fidelity Insurance?

There are various types of fidelity guarantee insurance plans. The details are as follows:

Individual Policy

An individual policy only covers the loss due to cheating by an individual employee

Collective Policy

A collective fidelity guarantee policy covers the loss due to theft or fraud committed by a group of employees. The cover is provided based on the employees' positions and responsibilities.

Blanket Policy

A blanket policy covers a group of employees without specifying any names. It is ideal for large businesses.

Floater Policy

A floater insurance policy specifies insurance coverage for the entire group and not for individual employees. Every claim reduces the sum insured amount. This has to be reinstated by paying an additional premium. At least five employees are required to get a floater policy.

First-Party Coverage

This policy covers the losses due to cheating by your own employees

Third-Party Coverage

This policy will protect the business against claims made by customers for dishonest acts of your employees

Who Needs Fidelity Guarantee Insurance?

Fidelity Insurance is required for every business that employs people to handle cash and other critical functions. A few examples are given below.

A business that handles a lot of cash on a daily basis. E.g., hotels, retail stores, movie theaters

A business that holds a large volume of merchandise products. E.g., shopping malls, antique stores

Any business that has a large clientele base. E.g., event management companies, PR firms, marketing agencies

A business that collects the personal information of its customers. E.g., online stores, banks

Covered
Not Covered

What is Covered Under Fidelity Insurance?

Fidelity Guarantee Insurance covers the following risk factors.

  • Theft of business assets by employees is covered by fidelity guarantee insurance.
  • Embezzlement of funds by employees, i.e., employees using the company's money for personal purposes or creating fake bills
  • Fidelity bond insurance also covers business loss due to forgery committed by employees.
  • Theft or fraud committed by the employees on the customers.

The insurance coverage shall be limited to the following:

  • The amount stated against a particular employee or a group of employees
  • The total sum insured stated in the fidelity guarantee insurance policy

What is not covered under Fidelity Insurance?

Fidelity Insurance does not cover the following losses.

  • More than one claim was made against an employee after discovering their theft/fraud.
  • Consequential or indirect losses such as loss of profits, business interruption, or loss of business opportunity due to dishonest acts of employees
  • Losses due to suppression of material facts at the time of purchasing the policy
  • Losses arising outside the geographical limits stated in the fidelity guarantee policy
  • Losses discovered more than 12 months after an employee's service is terminated.
  • Losses arising due to deliberate acts or gross negligence by the business
  • Losses not attributable to fraud or dishonest acts such as trading losses, stock-taking shortages, etc
  • Any direct or indirect loss due to trading in securities will not be included under fidelity guarantee insurance cover.

What are the Benefits of Fidelity Insurance?

Some of the advantages of a fidelity guarantee policy are:

Protection for the business against theft and embezzlement of funds by the employees

Coverage for the loss of business assets such as inventory, documents, and data

Fidelity insurance also covers the loss of customers’ assets due to theft or fraud by the employees

Protects the entire business from the dishonest acts committed by a few employees

Protects the reputation of the business and builds the trust & confidence of its stakeholders

The fidelity guarantee insurance cover can be customized according to the specific requirements of any business

Frequently Asked Questions on Fidelity Insurance UAE

Businesses can suffer huge monetary losses due to theft, fraud, or any such unscrupulous acts committed by their employees. Online fraud has also increased in the wake of rising digital transactions. Fidelity bond insurance offers comprehensive protection to the business against such unforeseen risks.

Fidelity insurance covers theft, fraud, forgery, embezzlement of funds, and other dishonest acts that result in direct financial losses to the business. The policy does not cover (i) indirect losses and (ii) losses from acts with no evidence of dishonesty

A professional indemnity insurance policy protects professionals like doctors, consultants, lawyers, etc., against claims of errors and negligence made by their clients. but fidelity guarantee insurance protects the business against deliberate acts of theft, fraud, and dishonesty by the employees.

The policy period is 12 months. The policy provides cover if the fraud is committed during this period and discovered within 12 months from the date of expiry of the policy.

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