Who is referred to as the Principal in a fidelity bond?

In the context of a fidelity bond, the Principal is the individual or entity whose performance is being guaranteed. This typically refers to an employee or contractor whose actions may be covered by the bond. If the Principal engages in dishonest or fraudulent acts that result in a loss for the bondholder, the fidelity bond serves as a financial safeguard for the employer or organization that has hired the Principal.

The financial institution providing the bond acts as the surety, offering the guarantee against loss, while the party receiving the guarantee would be the organization or employer that relies on the bond for protection. The issuer of the bond is the entity that underwrites the bond and assumes the risk of loss, which further clarifies the roles within the fidelity bonding process. Understanding these roles is crucial for grasping the overall functionality of fidelity bonds and the protective measures they provide in various business relationships.