Fidelity Bond Insurance
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Fidelity Bond Insurance for Small Business
Sometimes known as a “Dishonesty Bond”, a Fidelity Bond covers employers from losses stemming from dishonest and/or negligent actions of their employees. Fidelity Bonds reimburse employers for losses, up to the amount of the bond, from employee fraud, theft, forgery, and embezzlement of the company’s cash and other valuable assets.
Some insurance companies offer Fidelity Insurance, which covers all employee dishonesty in general. Others offer Fidelity Bonds, which cover only specific employees (typically those entrusted with handling the organization’s most important assets).
What Fidelity Bond Insurance Is Not
Unlike Surety Bonds, Fidelity Bonds are purchased only for the employer’s benefit, and only cover losses stemming from employee dishonesty and negligence.
Some insurance companies offer Fidelity Bonds as a part of their overall business insurance, but a Fidelity Bond is not the same thing as Commercial Property Insurance.
Fidelity Bonds are not to be confused with products and services offered by Fidelity Investments Company and Fidelity Brokerage Services, LLC.
Who Needs Fidelity Bond Insurance?
Any company that has one or more employees entrusted with handling large amounts of cash or other valuable assets should consider Fidelity Bond protection. Insurance companies, securities brokers, and companies with retirement plans may be required by law to carry Fidelity Bonds.
People who have direct access to a company’s cash, securities, and accounting records, and those who handle investment funds, should be covered. Fidelity Bonds often come in specialty forms, such as those covering janitorial services and those covering pension and trust fund managers.
Things To Think About
The first thing to determine is specifically who within the organization needs to be covered by a Fidelity Bond. This will help you decide whether to purchase a blanket bond that covers all employees, or a bond that only covers certain ones in key positions.
Before purchasing a Fidelity Bond, check the scope of coverage and all exclusions very carefully. Some types of employee dishonesty (e.g. relating to salary and benefit fraud) may not be covered. Is computer crime covered?
Find out if the Fidelity Bond covers employee actions off premises, like at a customer’s location, in transit, or on a business trip.
It is possible that purchasing a Fidelity Bond will lower your Commercial Property Insurance premiums.
Some states may provide free (or greatly reduced) Fidelity Bonds for hard-to-place employees like former convicts or drug addicts.
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Frequently Asked Questions (FAQs)
Get clear answers to common insurance questions and important details to guide your coverage decisions.
What is Fidelity Bond Insurance?
Fidelity Bond Insurance, also known as employee dishonesty insurance, protects businesses from financial losses caused by fraudulent acts committed by employees. These acts can include theft, embezzlement, forgery, and other types of dishonest behavior. This insurance helps companies recover lost assets and maintain financial stability.
Who needs Fidelity Bond Insurance?
Fidelity Bond Insurance is essential for businesses where employees handle cash, valuable assets, or sensitive information. It is especially important for industries such as financial services, IT, consulting, and cleaning services, where employee access to valuable or confidential information poses a significant risk.
What does Fidelity Bond Insurance cover?
This insurance covers various losses caused by employee dishonesty, including theft of money, property, or data; embezzlement; forgery; and fraud. It can also provide protection against financial loss due to employees’ illegal activities, such as hacking or misusing sensitive customer data.
What is not covered by Fidelity Bond Insurance?
Fidelity Bond Insurance does not cover losses due to errors and omissions, property damage, bodily injury, breach of contract, or employee actions that do not result in financial loss. Coverage is specifically designed to address fraudulent acts and theft by employees rather than general business risks.
How much does Fidelity Bond Insurance cost?
The cost of Fidelity Bond Insurance varies based on factors such as business size, industry, and the amount of coverage needed. On average, the premium ranges from 0.5% to 2% of the total bond amount, with coverage amounts typically starting from $5,000 and going up to $10 million depending on the business’s needs.
Can the cost of Fidelity Bond Insurance be covered by the plan itself?
Yes, in certain cases, such as ERISA bonds, the cost of the fidelity bond can be paid from plan assets, assuming the plan permits payment of such expenses.
How do I choose the right Fidelity Bond Insurance?
When selecting a Fidelity Bond, consider the types of employee actions you need protection against, such as theft or embezzlement, and ensure that the bond amount adequately covers potential losses. It is also essential to work with an experienced insurance broker to tailor the policy to your specific business needs and industry risks.
