Under the discovery condition loss sustained form, how long are losses covered after the bond has expired?

The correct answer is one year because, under the discovery condition loss sustained form, any losses that are discovered after the expiration of the bond are still eligible for coverage, but only for a period of one year. This provision is intended to allow for claims to be made on losses that were not immediately apparent at the time the bond expired, providing a crucial window for policyholders to report these losses once they are discovered.

The timeframe reflects a balance between the need for insurers to limit their exposure after a bond has ended and the need for policyholders to have reasonable time to identify and report losses that have occurred during the bond period but came to light afterwards. This coverage is particularly important in scenarios where fraud or misappropriation of funds may not be recognized until some time has passed. Other durations mentioned, such as six months or longer periods, do not align with the provisions outlined in typical loss sustained coverage under such bonds.