Fidelity bonds are designed to provide your small business with financial protection in case a trusted employee steals money, items, information or other valuable assets from your business or a customer.
Fidelity bonds are often used when an employee is trusted to handle valuable assets or cash. Fidelity bonds may be required in some customer contracts before they will allow your company or employees to provide services.
Unlike an insurance policy designed to guard against the financial and legal consequences of a negligent act, a fidelity bond provides a financial guarantee that a deliberate act such as theft will not take place.
Because deliberate acts are not covered by insurance policies, small businesses need to also consider fidelity bonds to arrange effective financial protection against employee fraud or theft.
The cost of a fidelity bond will vary according to several factors, including the type of work your small business conducts, the type of clients you work with, the amount of assets that may be involved, the size of your firm, previous losses, and other factors.
Several types of fidelity bonds are available to small business owners:
- Business services bonds provide protection for the loss of customer money, equipment, supplies or personal belongings caused by employee theft on a customer's premises. This type of bond is typically used by businesses that provide custodial services, contractors, and other companies that need off-hours access to customer worksites.
- Employee dishonesty bonds protect small businesses against financial loss resulting from employee fraud or theft of money, equipment, or other property owned by your small business.
- ERISA bonds are specialized forms of coverage designed to protect trustees of employee benefits or pension plans.
Services providers may also wish to consider fidelity bonds if their employees have access to clients' financial information, customer records or IT resources. Any inappropriate access or misuse of sensitive client information, are among the exposures that can be covered with a fidelity bond.