What do fidelity bonds primarily guard against in a business setting?

Fidelity bonds are specifically designed to protect businesses from losses resulting from fraudulent actions and employee dishonesty. In a business context, this form of insurance provides coverage against theft, embezzlement, and other dishonest acts committed by employees. When employees abuse their positions of trust, fidelity bonds serve as a financial safeguard, enabling companies to recoup some of the monetary losses incurred due to such wrongful acts.

While reputational damage, natural disasters, and workplace injuries are significant risks that businesses face, they fall outside the scope of fidelity bonds. For instance, reputational risks pertain to public perception and brand integrity rather than direct financial theft or fraud. Natural disasters relate to property and casualty insurance, covering damage to physical assets rather than employee misconduct. Similarly, workplace injuries are managed through workers' compensation insurance, which addresses employee welfare and medical costs following on-the-job incidents. Thus, the primary focus of fidelity bonds is indeed on protecting businesses from the risks associated with employee dishonesty and fraudulent activities.