What is a fidelity bond and how much coverage do we need?

A fidelity bond — sometimes written as crime coverage or employee dishonesty insurance — pays the association when someone with access to its money steals it. It is the specific protection against the failure mode that has produced most of the large losses in this industry.

The standard benchmark is coverage at least equal to the maximum funds handled at any single point in the year, including operating balances, all reserve accounts, and any special assessment proceeds passing through. Associations that set a limit years ago and never revisited it are frequently underinsured by a wide margin, because the reserve balance grew and the limit did not.

Several states set statutory minimums, often expressed as a multiple of monthly assessments plus reserves. Treat those as a floor rather than an answer.

The critical detail is who is covered. The association's own bond typically covers its directors, officers and employees. It does not automatically cover the Management Company's staff, who are the people actually handling the money day to day. You want both: the association's own bond, and confirmation that the Management Company carries its own coverage naming the association. Ask for that certificate specifically. It is the single question in this whole list most likely to surface a real gap.