General bonds provide insurance coverage for financial institutions against employee error, dishonesty, and theft. There are two types: business and position, with varying levels of coverage. They offer security for investors and allow firms to continue trading after a loss.
The general bond is a form of insurance coverage that provides protection for brokerage firms in the event of employee error or dishonesty, as well as in the event of theft. General bonds are also often carried as part of broad insurance coverage for other types of financial institutions that are responsible for managing the financial assets of individuals and corporations.
There are two common forms of the general link. The business general bonus provides protection for an employer that is far-reaching in scope and application. A commercial global bond provides a maximum amount of coverage in the event of a loss, regardless of the number of employees involved in the circumstances that created the loss. With the commercial type of general bond, the position of the employee or employees within the company is not a factor. Anyone from the janitor to the president of the firm can be involved and the loss will still be covered.
The second example of the coverage link is known as the position position link. With the general bond position style, the employer is insured against the actions of employees who hold specific positions within the company. The amount of coverage is based on the particular position covered. In the event multiple employees are involved in the loss, the blanket bonus will allow for maximum coverage which is a cumulative total of the insured amount for all positions involved in the loss.
General bonds provide a sense of security for brokerage firms and other businesses that deal with investors’ assets. Providing coverage in the event of theft or serious employee error makes it possible for investors to recover their losses and for investment firms to fix the problem and continue trading. From this perspective, the general bonus can be seen as a tool that helps ensure that the investor is taken care of, no matter what circumstances may occur within the brokerage.
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