What is the primary characteristic of fidelity bonds?

Fidelity bonds are specifically designed to protect businesses from losses that occur due to employee dishonesty, such as theft or fraud. This focus on employee behavior is what predominantly differentiates fidelity bonds from other types of insurance, like general liability coverage or property insurance, which may cover physical damage or various liability scenarios.

The nature of fidelity bonds is to provide a safety net for employers against the financial ramifications of dishonest acts committed by their employees. This means that if an employee engages in misconduct, such as stealing money or tampering with company assets, the fidelity bond would offer compensation for the monetary loss incurred by the employer as a result of that behavior.

In contrast, the other options involve aspects that are not characteristic of fidelity bonds. For example, while some insurance may cover physical damage, fidelity bonds specifically address the integrity of the workforce. Limitations on specific contract breaches typically pertain to performance bonds or contract bonds, and fidelity bonds do not serve to replace liability insurance, as liability insurance covers different risks altogether. Thus, the essential feature of fidelity bonds is their focus on safeguarding businesses against losses stemming from employee dishonesty.