When you hire new employees, you normally have an interview process. Sometimes you might even run a background check on potential candidates. But does this mean your business is protected from theft or fraud? No. Many companies decide to purchase a Fidelity Bond for added coverage for their business.
What is a Fidelity Bond?
A Fidelity Bond is an insurance policy that protects companies against financial loss due to employee fraud and theft.
Fidelity Bonds are also called Employee Dishonesty Bonds or Business Service Bonds.
Types of Fidelity Bonds
There are essentially 2 types of Fidelity Bonds: first-party and third-party.
- First-party Fidelity Bonds protect businesses against intentional wrongful acts committed by an employee of that business (for example: fraud, theft, embezzlement, etc.)
- Third-party Fidelty Bonds protect businesses against intentional wrongful acts committed by people working for a business on a contract basis (consultants, contractors, etc)
Fidelity Bonds & What They Cover
- Business Service Bonds: Business Service Bonds protect property owners from theft that happens by service providers such as house cleaners, maintenance workers, pet sitters, landscapers, etc.
- Commercial Crime Fidelity Bond/Dishonesty Bond: These Fidelity Bonds protect businesses from book-keepers or employees directly responsible for handling the money in a business. The coverage protects businesses in the event that an employee should embezzle money.
- ERISA Bonds: An ERISA Bond protects participants and beneficiaries from dishonest acts of a fiduciary who handles employee benefit or pension plans, including 401(k)s. This bond is the only Fidelity Bond required by law.
How Much Does a Fidelity Bond cost?
Fidelity Bonds are quite inexpensive considering they cover so much. For example, a business who wants $100,000 in coverage can secure a Fidelity Bond for around $300-$400 a year. Many policies cover up to $500,000 in losses without significant premium increases.
At Surety Solutions, we can get you a Fidelity Bond for your business today. Give us a call at 866-722-9239 or use our interactive application by clicking below.
Who is Covered by a Fidelity Bond?
Fidelity Bonds are normally considered to be ‘blanket bonds’ which means they cover all of the employees in a given business. However, depending on the type of policy, they might only cover certain employees. This is particularly true for Commercial Crime Fidelity Bonds/Dishonesty Bonds.
The specifics of coverage are detailed in each policy, but generally, a blanket Fidelity Bond covers the following people:
- Current and former employees
- Seasonal/temp employees
Who Needs a Fidelity Bond?
All businesses should consider purchasing a Fidelity Bond for added protection, but the following companies are particularly at risk/might even be required by law to secure a Fidelity Bond:
- Cash carriers
- Messenger/courier services
- In-home service provides (nursing care, pet sitting, house cleaning, etc) - Janitorial Bonds
In short, a Fidelity Bond should be considered when you wish to protect your business from theft by your employees, or when you wish to protect your customers from theft by your employees.