Which type of bond covers losses caused by dishonest employees?

The correct answer is a blanket bond. This type of bond provides coverage specifically for losses that occur due to dishonest acts committed by employees. Blanket bonds are often utilized by businesses to protect against theft, fraud, or other forms of employee dishonesty that can result in financial loss.

These bonds cover not only specific individuals but can extend to all employees or a designated group within the company, which helps provide broad protection without the need to list individual employees. This feature makes blanket bonds particularly advantageous for businesses where employee turnover is common or in industries where trust is crucial.

In contrast, performance bonds are typically used in construction or service contracts to guarantee that a party will fulfill their contractual obligations. Surety bonds are more general and often involved in situations requiring a guarantee that one party will meet certain obligations to another party. Liability bonds focus on protecting against claims arising from injuries or damages to third parties rather than employee-related misconduct. Therefore, the blanket bond is distinctly tailored to cover losses from dishonest actions of employees.