What is Fidelity Insurance?

It takes a lot of effort to make a business succeed and it is no one man’s play. The cooperation, coordination and trust amongst the team members lies at the base of every successful business. But the dishonesty of even one employee might cause a huge loss to the business and may lead to its downfall. Therefore, even after selecting the right team, it is necessary to be prepared for any such instances. Fidelity Insurance is one such precautionary measure against fraudulent employees every business must take.

What is Fidelity Insurance?

Fidelity insurance is an insurance policy that offers protection to businesses against business losses caused by employee fraud, theft or dishonesty. It also covers losses caused to customers due to such dishonest employees. The amount of premium for this insurance premium amount is determined by factors like the number of employees, risk exposure and nature of business.

Every business which has employees that handle money processes is eligible to take up fidelity insurance such as, restaurants, cafes, retail businesses, etc.

The types of fidelity insurance plans

The various types of fidelity insurance plans available are:

1. Individual policy: Under this, the cover is limited to the losses caused due to fraud or dishonesty of an individual employee.

2. Blanket policy: This policy covers a group of employees without mentioning the name of the guaranteed person.

3. Collective policy: Under this policy, coverage is provided against the losses caused due to the fraudulent acts of a group of employees. The coverage under a collective fidelity insurance policy is decided based on each employee’s position and responsibility.

4. Floater policy: One amount of guarantee is given across a group of employees. To avail of this cover, the group should contain at least five employees.

What are the benefits of Fidelity Insurance?

The benefits of this policy are as follows:

• It helps in covering up the losses caused by dishonesty or faulty practices of the employees.
• It provides coverage for the loss of essential business assets like property, technological tools, important documents such as stock papers, etc.
• It protects the interests of the customers and provides coverage for the losses faced by them too.It prevents financial crises that might occur in the business resulting from the misconduct of a few dishonest employees.
  It helps in saving the reputation of the business in the market that might otherwise get affected
• due to the incident.
• It also ensures transparency and accountability in supervision within the business.

What is covered by Fidelity Insurance?

The coverages offered under fidelity insurance are as follows:

• Theft committed by employees. This includes complaints of stolen valuables made by customers and also stolen assets.
• Any dishonest act by employees such as embezzlement or misuse of employment capacity for personal gains.
• Any act of misuse or forgery of the company’s money by employees.

The coverage that is offered to the insured company is limited to:

• The total sum that is specified in the policy.
• The amount of guarantee that is stated against the employee’s name or against the relevant category/group of employees that are mentioned in the policy schedule.

What is not covered by Fidelity Insurance?

A fidelity insurance policy does not cover certain situations. Some of these exclusions are:

• Any loss that happens due to willful acts or negligence by the insured, employee or any person acting on their behalf.
• Trading losses, damages in the goods and losses which are not caused due to fraud or dishonesty.
• Losses arising due to relaxation and non-observance of precautions and protocol.
• More than one claim filed against an employee.
• Losses occurring anywhere outside the territorial limits that are mentioned in the policy.
• Losses caused due to hiding facts that affect the risk at the time the policy was implemented.
• The loss that is detected a year after the employee has terminated his or her service.

What is the claim process for fidelity insurance?

Any business wanting to avail of fidelity insurance should have proper records and details. The business should fill in the proposal form and give all the information and additional documents required. For instance, a company seeking fidelity insurance has to provide a detailed list of departments and employees to the insurer. Every important detail should be disclosed to the insurance company.
The claim process for fidelity insurance is easy. The steps are as follows:

Step 1: The insured business should immediately intimate the insurer about the claim incident. Based on the situation, the business should also take quick disciplinary action against the employee.

Step 2: The claim documents must be submitted along with the relevant proofs of the act of infidelity and loss.

Step 3: The insurer will hold a forensic audit. If the claim is approved, the auditor will verify and approve the claim amount. If it is rejected, the insured company will be informed. The reason for rejection will also be mentioned.

If the claimant is dissatisfied with the solution provided, they can take the matter to the court of law.

What are the documents required for a fidelity insurance claim?

The documents required for fidelity insurance claims are:

• A duly signed and filled claim form.
• A xerox of the fidelity insurance policy document.
• A detailed description of the employee’s duties
• Private reference of the dishonest/ fraudulent employee.
• An Internal investigation report
• A Police FIR regarding the theft or embezzlement.
• Auditor’s report estimating the loss
• Details about the date of discovery of the loss.
• Statements from witnesses.
• Proof of loss along with evidence of forgery or identity theft.
• Evidence such as invoices or receipts of stolen property, if any.

The coverage offered by a fidelity insurance policy can be different for every business. The coverage offered will depend on the requirements of the business.

The cover can be availed for all employees or even particular departments. There are various types of fidelity insurance policies that are offered by insurance companies today.

That is why businesses who want to opt for fidelity insurance should conduct proper research, both offline and online before making a decision.