What it is:
Blanket bond refers to insurance coverage carried by banks and brokerage houses that protects against any losses incurred by unlawful or dishonest activity on the part of employees. It is also called a blanket fidelity bond or a fidelity bond.
How it works (Example):
A blanket bond is a form of SEC-mandated insurance that protects banks, investment houses, and other financial companies.
Examples where a blanket bond would protect the company include, but are not limited to, trading fraud, embezzlement, material and intellectual theft, and forgery.
Why it Matters:
A blanket bond differs from other insurance because it protects against a loss as a direct result of illicit activities from within the company. Most insurance policies would typically cover only losses incurred from external occurrences, such as burglary and property damage.