Arkansas Insurance Adjuster Practice Exam

A fidelity bond covers:

1. A self-insured business for workers' compensation claims filed by its employees when the business cannot meet its obligations.

2. The public from a public official's lack of performance.

3. Principal and interest payable under the terms of a contract or promissory note.

4. An insured business for loss resulting from any dishonest acts committed by its bonded employees.

The correct answer is: An insured business for loss resulting from any dishonest acts committed by its bonded employees.

A fidelity bond provides coverage to an insured business for losses resulting from any dishonest acts committed by its bonded employees. This type of coverage is specifically designed to protect businesses from financial losses due to the dishonesty of their employees. It is important for businesses to have fidelity bonds in place to safeguard themselves against potential fraudulent activities that can occur within their organization. Option A is incorrect because a fidelity bond does not cover workers' compensation claims filed by employees. Workers' compensation is a separate type of insurance that provides benefits to employees who are injured or become ill as a result of their job. Option B is incorrect because a fidelity bond does not cover the public from a public official's lack of performance. Performance bonds are typically used in situations where a public official or contractor fails to fulfill their obligations under a contract. Option C is incorrect because a fidelity bond does not cover principal and interest payable under a contract or promissory note. This type of coverage is usually provided by financial instruments such as surety bonds or insurance policies tailored for those specific purposes.