A financial institution bond provides insurance for banks to protect against losses caused by employee or external actions. Basic coverage includes protection for the bank’s property, items lost during transit, and losses from counterfeit money or internal sabotage. Optional coverage includes protection for unauthorized use of credit and debit cards, data loss, and loss of items in safe deposit.
A financial institution bond protects financial institutions from risks that may arise as a result of conducting their business. He works to protect the bank’s assets and its investments form different types of losses that can be the result of employee actions or other external and internal acts. The bond is a form of insurance for financial institutions and provides a basic cover that all banks are required by law to carry. It also provides some optional coverage at additional costs, which banks may or may not choose to purchase.
A basic coverage provided by the financial institution bond is the protection of the financial institution’s property. This includes incidents involving property belonging to the financial institution, as well as any property belonging to employees and customers on bank premises. For example, if an armed robber breaks into a bank premises to steal some money and then makes off with a customer’s vehicle, the customer’s vehicle would be covered by the financial institution’s bond. This is in addition to covering the loss resulting from money stolen from the bank.
Other basic coverage is for any item lost during transit, either in transition to or from the bank. Such items include money, jewelry, and other valuables. The only condition for providing coverage for such items in transit is that banks must engage the services of an armored car that is accompanied by an escort, who may be a representative of the bank or the armored car company. The basic coverage also covers any type of loss incurred by the bank through the wrongful acceptance of counterfeit money by a depositor. The coverage also includes acts of internal sabotage as a result of fraudulent activities involving employees of the financial institution.
The optional coverage provided through a bond from a financial institution includes protection for any unauthorized use of credit and debit cards belonging to bank customers. Other types of optional coverage include protection for any loss suffered by the financial institution as a result of data loss, whether through a virus, hacker, or equipment malfunction. The financial institution bond also provides protection for any loss suffered by a bank as a result of the destruction or loss of an item that has been placed in the safe depository. For example, if a client places some valuable gemstones in a secure bank deposit and the stones are stolen, the financial institution bond will cover the cost of the stolen gemstones, if that option is included in the coverage.
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