When an employer notifies an insurance company of an employee's dishonesty, what happens to the bond?

When an employer notifies an insurance company of an employee's dishonesty, the bond remains in effect, but the employer is typically required to either discharge or prosecute the employee involved in the dishonest act. This is because the insurance bond is designed to protect against losses incurred due to employee dishonesty, and the continued coverage often hinges on the employer taking appropriate action against the dishonest employee. By discharging or prosecuting the employee, the employer demonstrates responsibility and compliance with the terms of the bond. This act may also influence the insurance company's response and obligations concerning the bond.

The other options suggest different outcomes that do not accurately reflect the typical process when dishonesty is reported. For instance, voiding the bond immediately is not a standard practice; rather, the bond stays in force to cover any potential claims as long as the employer acts appropriately. Reducing the bond amount or claiming that the bond does not change fails to capture the necessary actions taken to maintain compliance with the bond's terms in light of the reported dishonesty.