How do Fidelity Bonds Work?
The shortcomings of fidelity bonds are: • They are characterized by a low premium-to-payout ratio. • Bond policies are ambiguous and complex. The terms and scope of coverage varies with each policy. • Compensation can reduce if the time lag between the bond purchase and the actual payments is large. • Bond payouts can not be accounted for while calculating an institution’s worth. • Litigation complexities can delay the payment of large bond claims.
