DEDUCTIBLE:
An amount which is to be "deducted" from any loss and which the insured
agrees to bear personally.
DEPOSITORY BOND:
This guarantees repayment of moneys deposited with a bank in the event
of the failure or insolvency of the bank.
While this is now a negligible line of surety business, it was once a
large one. The Federal
Deposit Insurance Corporation (FDIC) now guarantees the payment of bank
deposits.
DEPOSITORY LIABILITY:
A public official is liable for public funds which he/she deposits in a
bank and cannot pay over because of insolvency or failure of the bank.
In many states, statutes provide for the designation of depositories for
public funds and for the furnishing of collateral security by such
depositories. Such laws, if
interpreted strictly, usually exempt the public official and his/her
surety from liability for loss through failure of any of the designated
and qualified depositories.
DEPOSIT PREMIUM:
The advance premium required by a surety company on those forms of bonds
which are subject to premium adjustment.
DISCOVERY BOND:
A form of fidelity bond which covers against dishonest or fraudulent
acts of employees, provided such loss is discovered any time after the
bond becomes effective and before it is terminated, irrespective of when
the dishonest or fraudulent acts were committed.
DISCOVERY PERIOD:
Under certain bonds and policies, provision is made to give the insured
a period of time after the cancellation of a contract in which to
discover whether a loss was sustained that would have been recoverable
had the contract remained in force.
This period usually varies from six months to three years.
The period may be determined by statute; in certain bonds, it is of
indefinite duration because of statutory requirement.
DISHONESTY INSURANCE:
A generic term describing fidelity bond coverage guaranteeing against
loss caused by dishonest officers or employees of a commercial firm or
by dishonest public officials or employees.
EARNED PREMIUM:
The premium amount which would compensate the surety for the protection
furnished for the expired portion of the term of the bond.
EFFECTIVE DATE:
The date from which bond coverage is provided.
ENDORSEMENT:
A form attached to the bond to add to, alter, or vary its provisions.
Sometimes called a rider.
EXCESS BOND:
Additional coverage over a primary bond protecting against certain
perils (usually dishonesty) applying only to loss above a specified
amount.
EXCLUSION:
A provision in a bond referring to perils or property not covered.
EXECUTOR:
One named in a will to distribute and settle the estate of the testator.
EXPENSE RATIO:
The percentage of the premium used to pay all costs of acquiring,
writing, and servicing the bond.
EXPERIENCE:
The loss record of either an individual or a class of coverage.
EXPERIENCE RATING:
A plan available for fidelity bonds whereby surcharges or discounts are
applied to premiums developed by those risks based on the actual past
experience of such risks.
EXPIRATION:
The date upon which a bond will cease to provide coverage unless
previously cancelled.
FAITHFUL PERFORMANCE BOND:
A type of bond where the coverage goes beyond protection against loss
due to dishonesty or fraudulent acts of the principal; it provides
protection to the named insured against loss by reason of the failure of
the persons covered hereunder to faithfully perform their duties as
prescribed by law or by the constitution and bylaws of the insured or
their equivalent.
FIDELITY BOND:
A bond which will indemnify an insured for loss caused by a dishonest
act or fraudulent act of an employee covered under the bond. Also known as dishonesty insurance.
FIDUCIARY:
A person who occupies a position of trust, particularly one who manages
the affairs or funds of another.
FIDUCIARY BOND:
Required of administrators, executors, guardians, committees, etc.,
guaranteeing faithful performance of duty in accordance with the laws
applicable to the trust.
Frequently called a probate bond because the bond is customarily filed
in a probate court.
FINANCIAL GUARANTEE BOND:
A bond that guarantees payment of a sum of money whether or not the
exact amount is known or stated.
Common types are: court
bonds (appeal, etc.), lease bonds which guarantee payment of rent, etc.
FINANCIAL RESPONSIBILITY LAW:
A statute requiring motorists to furnish, either before or after an
accident, evidence of ability to pay damages.
Such evidence may be furnished by a surety bond.
FINANCIAL STATEMENT:
A balance sheet which the surety requires of an applicant for a bond
(particularly a contractor), setting forth his/her financial position as
of a given time or period.
FIXED PENALTY BOND:
A bond for which the amount is expressed in terms of a stated and
definite sum of money.
FORFEITURE BOND:
A bond where the full penalty is payable upon breach of the
condition regardless of the amount of loss or damage.
