Lisa Terrasi, Commercial Account Associate, explains what a fidelity bond is and why it’s necessary.
A fidelity bond also known as Employee Dishonesty or Crime Coverage, provides the association with coverage for theft by an employee or board member. Without this coverage, if money were stolen by a covered party, the association may not have recourse. If the policy allows it, coverage should be extended to include acts of the property management firm, so that funds stolen by their employees would be covered as well. It is typically a requirement of the lender who holds the underlying mortgage for a co-op, as well as the lenders for the individual owners in all community associations. Without the community association maintaining this coverage, owners would not be able to close or refinance a loan. The limit required is generally in the amount of three months of maintenance fees, though that varies in certain instances.