AFSB key terms

A bond that reimburses an employer or other insured for financial loss caused by the dishonest or fraudulent acts of its own employees. Coverage usually applies to employee theft of money, securities, or other property.

An insurance policy that covers a business for losses from theft, fraud, forgery, and dishonesty by employees or outsiders. It may be written as a stand-alone policy or combined with other commercial coverages.

Coverage that responds when an employee steals money, securities, or property from the employer or obtains a benefit through fraud. It typically requires proof of dishonest intent and applies to employee acts committed during the policy period.

Coverage for loss when a third party forges the insured's signature or alters a covered instrument such as a check, draft, or promissory note, causing financial loss to the insured.

Coverage for loss of money, securities, or other property when a person uses a computer to fraudulently transfer or steal the insured's assets. It commonly requires direct entry into the insured's computer system.

Coverage for loss when a fraudster impersonates an authorized person and directs a financial institution to transfer money from the insured's account without the insured's consent or knowledge.

Coverage for loss when an employee is tricked by an imposter into transferring money or securities. The fraud usually relies on deception, not hacking, and coverage is often sublimited.

The unlawful taking of property from a person by threat of force or violence. In crime insurance, it usually involves a person present and aware of the taking.

The unlawful taking of property from a locked safe or vault by someone who enters it by force or violence, or who removes the safe from the premises.

The time after a policy ends during which the insured may report a loss that occurred during the policy period. It supports claims-made or discovery-based crime coverage.

A specialized fidelity bond for banks and similar institutions. It covers employee dishonesty, forgery, computer fraud, and other specified crimes, often with strict limits and conditions.

A bond required by federal law for employee benefit plans to protect the plan from fraud or dishonesty by persons handling plan funds or property. The required amount is generally ten percent of plan assets.

A person or entity named with the insured on a crime policy who shares the coverage. A loss by one joint insured may affect the rights of the others.

A three-party written promise in which the surety guarantees the principal's performance or payment to the obligee. If the principal fails, the surety may have to pay or complete the obligation.

The party in a surety bond who promises to perform a contract or obligation. The principal is primarily responsible for fulfilling the bonded duty.

The party in a surety bond who is protected by the bond and can claim against it if the principal fails to perform. In construction, the owner or project owner is often the obligee.

The party in a surety bond that guarantees the principal's performance. The surety is usually an insurance company and has recourse against the principal through indemnity.

A contract in which the principal and indemnitors promise to reimburse the surety for losses, costs, and expenses paid on bonds. It also gives the surety collateral and claim rights.

A bond guaranteeing that a bidder will enter into the contract if awarded and will provide the required performance and payment bonds. If the bidder fails, the surety may pay the difference in bid price.

A bond guaranteeing that the contractor will complete the contract according to its terms. If the contractor defaults, the surety may complete the work, arrange a replacement, or pay the obligee.

A bond guaranteeing that the contractor will pay subcontractors, suppliers, and laborers on a bonded project. It protects claimants who might otherwise have no direct contract with the owner.

A bond guaranteeing that a contractor will correct defects or repair work that fails during a stated period after completion. It is often tied to a construction contract's warranty obligations.

A federal law requiring performance and payment bonds on federal construction contracts above a certain threshold. It protects the government and gives unpaid subcontractors and suppliers a federal claim remedy.

The maximum amount the surety may have to pay under a bond. It is stated on the bond and usually equals a percentage of the contract price.

The value of construction work a contractor has started but not yet completed or billed. Surety underwriters use it to measure current workload and financial exposure.

The total value of contracted work a contractor has secured but not yet completed. A growing backlog can indicate capacity needs and future surety exposure.

A contractor's net worth after subtracting intangible assets such as goodwill. Surety underwriters use it to assess financial strength and capacity to absorb losses.

A bond required by a government authority as a condition for a license or permit. It guarantees compliance with regulations and protects consumers or the public from violations.

A bond guaranteeing that a person entrusted with funds or property for another will faithfully perform their duties. It is common for executors, trustees, guardians, and administrators.

A fiduciary bond required in estate administration. It protects heirs, creditors, and the estate if the executor or administrator mishandles estate assets.

A bond required in court proceedings to protect a party from loss caused by another party's legal action. It includes appeal, attachment, and injunction bonds.

A bond filed by an appellant to stay enforcement of a judgment while an appeal is pending. It guarantees payment of the judgment if the appeal fails.

A bond posted by a plaintiff to obtain a court order freezing the defendant's property before judgment. It protects the defendant if the attachment is later found wrongful.

A bond guaranteeing that an elected or appointed public official will faithfully perform official duties and account for public funds. It protects the government and the public from official misconduct.

A bond required for a notary public to protect the public from loss caused by the notary's improper official acts. It does not cover the notary's own dishonesty in most cases.

A bond used when a negotiable instrument such as a stock certificate or bond is lost. It protects the issuer from liability if the original instrument later reappears.

A bond given to customs authorities to guarantee payment of duties, taxes, and compliance with import laws. It allows goods to be imported or released before final payment.

A surety bond that remains in force until cancelled and automatically covers new obligations within its terms. It is common for customs and license bonds.

A written authority from the surety allowing an agent to sign and issue bonds on its behalf. It usually states the agent's limits and the bond forms authorized.

A bond guaranteeing payment of a financial obligation, such as a loan or lease, if the principal defaults. It is often treated more like credit insurance than traditional surety.