Objects of Risk

• Whenever a company hires an employee, it entrusts that employee with company assets with which to perform his job. With these assets, employees sometimes commit fraud, larceny, embezzlement or theft. By purchasing fidelity bonds, employers protect themselves from such risks associated with having an employee handle company assets.
  
  A fiduciary is someone that a court appoints to oversee another party's assets due to an inability to manage those assets. Knowing that fiduciaries do at times mishandle the assets, the owner can purchase fiduciary bonds to protect himself from losses that occur at the hands of the fiduciary.
  
  

Intent

• Aside from actions such as fraud, larceny, embezzlement and theft, employers are in danger of losing money due to the actions of employees in various other ways, such as liabilities resulting from damages done to third parties. Though losses from such liabilities are similar to losses from the acts listed above, fidelity bonds do not cover them. Fidelity bonds only protect employers against dishonest actions that employees intentionally take that will financially harm the employer for the sake of benefiting the employee or another party associated with the employee. Thus, if an employee unintentionally crashes a company car or breaks company equipment, fidelity bonds will do nothing.
  
  Fiduciary bonds, on the other hand, do not consider the intent of the fiduciary. A fiduciary bond covers virtually any action a fiduciary takes that results in a loss of assets for the asset owner.
  
  

When Are They Necessary?

• Since the crimes associated with fidelity bonds are crimes that many employees are not capable of committing, businesses typically purchase fidelity bonds only when they hire high-risk employees to high-risk positions. For instance, though a warehouse worker may have the ability to steal stock from the warehouse, hiring him is less risky than hiring a high-level employee who is going to be handling company finances.
  
  While fidelity bonds are typically optional for employees, fiduciary bonds often come as a legal requirement of the court. Courts usually appoint fiduciaries and declare that fiduciary bonds are necessary when an underaged child inherits a large sum of money or when the owner of an estate becomes too ill to manage his affairs.
  
  

Do I Have To Choose Between Them?

• Since fiduciary bonds and fidelity bonds deal with intrinsically different legal circumstances, they typically are not both applicable to a specific situation. Though they protect their beneficiaries against similar risks, they are mutually exclusive in their coverage.