What are Fidelity Guarantee Insurance and 5 Major Types of policy Covered?
Fidelity Guarantee Insurance policy reimburses the insured against the financial loss suffered by him as a result of fraud/dishonesty of employees of the insured up to the maximum limit selected for insurance per employee.
This type of insurance policy indemnifies the insured in respect of direct loss sustained by reason of fraud or dishonesty provided to have been committed by an employee of the insured company.
FGI was introduced in the 19th century to act as a substitute for the system of private securities. Before then people in responsible positions in commerce, industry, and government were often required to be guaranteed by other people.
The guarantor accepts to make transparent use of any money misappropriated through dishonest actions of the employee. As a matter of fact, not every honest man could find a surety because of the risk involved.
In 1840, fidelity guarantee insurance was formed in the United Kingdom to provide such guarantees by means of insurance; then in 1845 guarantee society was formed as well.
Also, it may be affected by any person or organization who may suffer loss as a result of dishonesty, failure in loyal performance of a duty, or in certain cases the mistake of another. it is classified as a commercial fidelity guarantee, court bond, government guarantee, and Local government guarantee.
NOTE THAT FGI POLICY DOES NOT COVER ANY OF THE FOLLOWING;
a. Losses discovered more than 12 months after the termination of the service of the employee concerned.
b. Funds deposited with the insured by the general public for investment purposes.
c. Loss due to non-observance or relaxation of the system of checks and precautions.
d. Loss of money or property not belonging to the insured
e. Any loss resulting directly or indirectly from trading in securities
f. Any financial losses not arising out of dishonesty/fraudulent acts of the employee are not covered by this policy.
In FGI: The insured is covered against a direct pecuniary loss sustained by reason of any act of fraud/dishonesty committed. It protects businesses against the dishonesty of an employee which leads to financial loss or fund misappropriation.
Characteristics of FGI:
a. The policy pays for the losses suffered as a result of employee’s dishonesty, misappropriations of funds, and fraudulent conversion of the company’s fund.
b. The maximum loss payable is limited to the specified limit for that employee.
c. The employer has the option to choose the type of FGI to go into whether individual policy, collective policy, floating, or position policy.
d. FG guarantors undertook to make good any money misappropriated through dishonest action of the employee.
TYPE OF POLICY Fidelity Guarantee Insurance
1. Individual Policy
Only individual is covered under this policy
2. Collective Policy
Just as the name implies it could cover the entire staff of a firm or a number of selected employees and against the name of each is set the amount of the guarantee. This type of pool revision owes to staff changes.
3. Floating Policy: This could cover the entire staff of a firm or a number of selected employees. The name of each individual is shown on the schedule and each or all of them is guaranteed for one fixed amount.
It is an extension of collective policy where the sum insured is specified for the whole group rather than for each individual. The names of the group members along with their designation are attached as scheduled to the policy. Each claim reduces the sum insured and has to be reinstated by paying an extra premium
4. Position Policy: Here the schedules show the guaranteed position rather than presenting individual names. This implies that any change in the person holding the position does not affect the cover and the liability is limited to the amount of sum insured specified against the position irrespective of a number of people working in that position.
5. Blanket Policy: This is usually for unnamed employees without designations. The policy takes on all employees following within the defined category and is not separated or identified according to names or designation
The Policy does not pay more than one claim in respect of liability/loss arising out of an individual employee’s acts. or the value of the actual cash value of money, bullion, Hundi, stamps, cheques, or similar instruments, stocks held on trust on the day upon which the loss is discovered, whichever is lower.
The number of claims resulting from a same fraudulent or dishonest act or a series of fraudulent or dishonest and the same originating cause by the same person, source, or event shall be deemed to be one claim subject to a single employee sum insured under the Policy
The rate of estimated premium charges FGI is 1.5% and 2.5% is charged respectively, depending upon the limit per occurrence, the aggregate exposure, as well as the loss history/experience of the client or the industry concerned is also considered.
Businesses from Commercial Banks and related institutions are subject to the agreed rating pattern adopted for banks. Flexibility in rating may however arise were justifiable by experience.
However, fidelity guarantee insurance is that insurance business that exists to protect the infidelity of the employees who hold a position of trust in the organization in the event of financial misappropriation. Example Cashier or accountant. In all. we have ended up discussing what are fidelity guarantee insurance & 5 Major types of policy Covered?