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A Guide to Fidelity Insurance in India
Nov 6, 2023

A Comprehensive Guide To Understanding Fidelity Insurance In India

Fidelity insurance is a crucial form of coverage that safeguards businesses against financial losses resulting from acts of dishonesty or fraud committed by employees. In India, where instances of employee misconduct can have severe implications, having fidelity insurance is essential.

What is Fidelity Insurance?

Fidelity Insurance, also known as Fidelity Guarantee Insurance, is a specialised type of insurance that protects businesses from financial losses caused by dishonest acts committed by employees. It provides coverage against various fraudulent activities, including embezzlement, theft, forgery, misappropriation of funds, and other forms of employee dishonesty. Fidelity insurance is typically purchased by businesses to mitigate the risks associated with employee-related fraud. Claims are subject to terms and conditions set forth under fidelity insurance policy.

What Does Fidelity Insurance Cover?

If you are a business owner or are someone tasked with protecting a business against any possible losses or damages consequential of the deliberate actions of a dishonest employee, a fidelity insurance plan can help you get the right type of coverage. Here are some of the common coverages offered by fidelity insurance:
  • An act, resulting in a loss, that is committed during the retroactive period and while the business was active.
  • An act or whose consequences were discovered while the policy was in force or within 12 months of the expiry of the policy.
  • An act causing loss or damage to the business, committed by an employee whose core motive was to achieve personal financial gain.
Claims are subject to terms and conditions set forth under fidelity insurance policy.

Types of Fidelity Insurance

Some of the common types of fidelity guarantee insurance plans available are:

- Individual Policies

This type of fidelity insurance coverage ensures that the organisation is protected against the dishonest acts of specific employees who may pose a higher risk.

- Collective Policies

In the event of a loss due to employee dishonesty, the organisation can file a claim under the collective policy to recover the financial damages suffered.

- Floater Policies

Floater fidelity insurance policies offer coverage for losses resulting from employee dishonesty that occurs outside the premises of the insured organisation.

- Blanket Policies

This type of fidelity guarantee policy simplifies administration and ensures that the organisation is protected against the risk of employee dishonesty across the board.

- First-Party Coverage

With first-party coverage, the organisation can file a claim under the fidelity insurance policy to recover the losses suffered.

- Third-Party Coverage

With third-party coverage, the organisation is safeguarded against claims and lawsuits brought by clients, customers, or other external parties who have suffered financial losses due to employee dishonesty. Claims are subject to terms and conditions set forth under fidelity insurance policy.

Exclusions of Fidelity Insurance

Before you buy a fidelity insurance plan, it is ideal to understand the exclusions, i.e., the conditions that lie outside the scope of the coverage of the plan. Here are some of the common exclusions of fidelity insurance. - Losses of the following kind:
  • Loss of profit
  • Interruptions to business
  • Loss not reflected in the account books of the entity/organisation
  • Opportunity loss
  • Loss of potential income or gain
  • Market loss
- Legal liabilities - Any act committed by a fraudulent employee that was not discovered within 12 months of the date of cessation of the role of the person as an employee of the company - Expenses related to establishing the facts or details related to the matter - Claim may not be considered valid if: - The entity insured is engaged in another business - There are material changes in the matters or facts stated in the proposal submitted by the entity insured - The employee responsibilities and/or terms of service vary as compared to the relevant details stated in the proposal - The checks and precautions employed by the insured to ensure the accuracy of accounts and stocks are not as mentioned in the proposal

Why Should One Consider Fidelity Insurance?

Fidelity insurance is vital for businesses due to the following reasons:

- Protection against financial losses

Fidelity insurance provides financial coverage and helps businesses recover from the financial impact of employee fraud or dishonesty.

- Employee trust and morale

Having fidelity insurance in place can help build trust among employees, as it demonstrates the organisation's commitment to protecting their interests and maintaining a safe working environment.

- Compliance requirements

Some industries or regulatory bodies may require businesses to have fidelity insurance as a part of their compliance obligations.

- Peace of mind

Fidelity insurance offers peace of mind to business owners, knowing that they are financially protected against employee-related fraud risks. Claims are subject to terms and conditions set forth under fidelity insurance policy.

Cost of Fidelity Insurance

The cost of fidelity insurance varies based on several factors, including the size of the business, the nature of operations, the coverage limits required, the number of employees, and the risk profile of the organisation. While you purchase a fidelity insurance cover, do not ignore on other Commercial insurance plans that are necessary for your business. Remember that such general insurance plans are essential to safeguard your financial interest, be it due to an employee dishonesty or other liabilities arising in the course of operations. Claims are subject to terms and conditions set forth under fidelity insurance policy.   *Standard T&C apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

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