This policy provides indemnity for the insured against all direct pecuniary loss sustained by any act of fraud or dishonesty committed by any of the insured employees in connection with the employee’s occupation during the period of guarantee and discovered during the currency of the policy or within twelve months of its expiry or termination of employment, whichever shall first happen.
There are four types of policy under this heading:
- Individual Policy: The individual policy covers an individual employee for a prespecified amount. Once the dishonesty has been discovered, you should report the discovery within 24 months.
- Collective Policy: The collective policy, as the name suggests, covers a group of employees. Based on each employee’s position and responsibilities, you will decide the amount of guarantee required.
- Floater Policy: The floater policy is similar to the collective policy. The difference is that only one amount of guarantee is given across a group of employees instead of different guarantee amount. Usually, you need at least five employees to be covered under floater policy.
- Blanket Policy: The blanket policy guarantees a group of employees, for e.g. employees who manage cash, without the names of the guaranteed person. The guaranteed amount can be in terms of each employee or on the amount of loss. Blanket policies are usually issued to more established businesses with sound internal controls.
The policy does not cover losses that are not backed by evidence due to bad accounting system, third party losses, losses arising from negligence, extortions and blackmails etc.
Who can buy this cover? As long as you have employees handling cash or processing payment, fidelity guarantee insurance will be useful for you.