What Is Fidelity Insurance?

Businesses get a variety of insurance plans to protect the organization, its owners and the employees. Among them is fidelity insurance, which essentially covers the business in case it's victimized by employee theft and embezzlement. Some companies specialize in fidelity plans, but they can come from general insurance firms as well.

Some industries rely more on fidelity insurance than others. Accounting firms, casinos, law firms and construction and technology companies typically get fidelity insurance. Other organizations like homeowners associations and non-profits also tend to get fidelity insurance.

The exact terms of a fidelity insurance policy vary depending on the provider and the buyer. Typically, it covers theft but can also protect against an employee stealing property and assets like stocks and bonds. Some companies also sell add-on policies and coverage for computer fraud, credit card forgery and extortion.

The fidelity policy often stipulates that an employee must commit the theft and outlines the exact definition of an employee in the contract. According to HindmanSanchez, organizations that do not have traditional employees should look for a policy that covers theft by board members, directors, officers and committee members. Often, the policy requires the business to prove the employee had intentions to steal or cause the company harm.