Fidelity bonds

A fidelity bond provides coverage when an employee's dishonest act, such as theft or fraud, causes a financial loss. It's sometimes called an employee dishonesty bond or fidelity bond insurance.

For example, if an employee steals from a client, the company that issued the bond would reimburse the client for the amount that was stolen.

Fidelity bonds are only required by law in a few situations. More often, clients will request a fidelity bond to protect their assets from your employees.

Businesses can apply a fidelity bond to specific at-risk employees, or buy a blanket bond that covers their entire workforce. Any business or nonprofit with employees who handle financial information could benefit from a fidelity bond.

A fidelity bond provides coverage if an employee engages in a criminal act that financially harms your small business or a client. That includes everything from cash register theft to an illegal electronic funds transfer.

Specifically, this bond protects against:

Fidelity bonds are an important part of risk management and loss control across a wide range of industries. Your clients may require you to have a bond if you handle sensitive information, or enter their properties unsupervised.

A fidelity bond guarantees your clients' assets are protected. This gives them peace of mind and trust in your company, which can be important when you're just starting out.

Independent contractors might also need a bond to sign a contract. It's typically the contractor's responsibility to secure fidelity bond insurance.

Here are several professions where fidelity bonds are often necessary:

IT professionals are frequently in a position where they could obtain and misuse confidential client information.

For instance, an IT consultant at your company overbills a customer for software and steals the excess. Once the crime is revealed, your company’s fidelity bond provides reimbursement for the loss.

Financial planners and advisors often have direct access to clients' bank accounts, which can be risky.

For example, an advisor at an investment company forges a client’s signature on a check and steals thousands of dollars. A fidelity bond would reimburse the client for the stolen money, up to the bond amount.

Certain financial institutions, such as banks and credit unions, may need a fidelity bond to comply with state and federal law.

Healthcare professionals work with patients during their most vulnerable times. If a patient is taken advantage of by an employee, a fidelity bond would protect your organization.

For example, if a home healthcare aide steals a laptop from a patient during their visit, a fidelity bond would compensate the patient for their loss.

Cleaning professionals and janitorial services are given access to spaces with valuable information and goods. If an employee takes advantage of the client's trust and steals an item, a fidelity bond would compensate the client.

For example, if an employee at a house cleaning company steals jewelry from a client's home during a cleaning, the company would be held liable. A type of fidelity bond called a janitorial bond or business services bond would reimburse the client for their loss.

Management consultants often handle a business's finances, including retirement plans and pension plans. Because of these responsibilities, they're often required to have a fidelity bond.

For instance, a consultant who handles a company's 401(k) illegally transfers money from it to their personal bank account. An ERISA bond would reimburse the plan's beneficiaries for the loss.

While fidelity bond coverage is crucial for several types of small businesses, it does not provide all the protection you need.

For instance, a fidelity bond does not include coverage for:

Yes, a fidelity bond is a type of commercial insurance offering financial protection for your small business. Contracts and licenses may have insurance and bonding requirements.

There are a few differences between insurance and most business bonds. Bonds typically must be repaid for the amount covered by a claim, while it's not necessary for an insurance claim.

However, in this respect a fidelity bond is similar to insurance. With a fidelity bond, the company that issued the bond will cover the loss, then seek reimbursement from the dishonest employee.

ERISA fidelity bonds must be purchased from a surety approved by the U.S. Department of the Treasury, which further blurs the line between a fidelity bond and insurance.

A fidelity bond is one type of employee dishonesty insurance, and sometimes the terms are used interchangeably.

Employee dishonesty coverage can also refer to an endorsement for commercial property insurance that protects your business from employee theft. Small businesses can often add this coverage to a business owner's policy (BOP) as well.

Chat with a licensed insurance agent to find out which insurance coverage best fits your business.

Complete Insureon's easy online application today to compare business insurance quotes from top-rated U.S. insurance companies. A licensed insurance agent will help you add other types of coverage, such as a fidelity bond.

Once you find the right policy or bond for your small business, you can begin coverage in less than 24 hours.

If you want to learn more about bonds, you can find additional information in our frequently asked questions about fidelity bonds.

If you have any other questions about business insurance or bonds, you can contact an Insureon agent.