What is the typical purpose of a fidelity bond?

A fidelity bond is essentially a form of insurance that protects against losses resulting from dishonest acts by employees, particularly theft or fraud. The primary purpose of a fidelity bond is to cover the risk of employee theft, ensuring that businesses have a safeguard in place against financial loss due to dishonest conduct. This type of bond provides a level of security for employers, helping to maintain trust and integrity within the organization.

While other options, such as protecting business assets, ensuring contractual performance, and managing customer disputes are important aspects of business operations and risk management, they do not specifically align with the core function of a fidelity bond, which is focused on protecting against employee dishonesty. Fidelity bonds serve as a protective measure, reassuring businesses and their clients that there is financial support in place should internal theft occur.