Fidelity Bond Law and Legal Definition

A fidelity bond is a debt obligation used to protect an employer from loss in the event that its employees cause damages through dishonest or negligent action. Insurance companies and securities firms are often required to possess a fidelity bond because of the high risk associated with hiring untrustworthy employees. Such a bond covers losses due to offenses such as theft, forgery, larceny, or embezzlement. A fidelity bond may cover job seekers who are considered high-risk due to some factor in their personal background and who have been rejected by a commercial bonding company.