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.