Insider’s Perspective: How Fidelity Bonds Protect Your Business from Employee Theft
Fidelity bonds are crucial for safeguarding businesses from financial losses caused by employee dishonesty. They can also help deter theft by demonstrating that a company prioritizes trust and integrity with its employees, clients, and stakeholders.
Employee theft insurance, or fidelity bonds, is valuable for all businesses. But they are particularly beneficial for companies that work in customers’ homes, such as janitorial and cleaning services or HVAC companies.
Employee Dishonesty
Employee dishonesty is a common problem facing businesses, especially those that handle money. These types of incidents are often called white-collar crimes and can cause devastating financial losses for a company. Fortunately, there is a way for companies to mitigate their financial losses if an employee commits theft or fraud. An insurance provider can customize a fidelity bond to cover the company’s assets. These policies can be purchased for all employees or individually and are typically included in a business owner’s or commercial package policy.
These types of bonds usually protect three parties: the principal, the surety, and the obligee. The principal is the company that purchases the bond; the surety is the insurance provider who sells it; and the obligee is the party who would be compensated if a claim is filed against the policy. Depending on the type of fidelity bond, the obligee may vary from a client to an employer.
Asset Theft
Fidelity Bonds reimburse clients directly for their losses incurred due to employee dishonesty. Generally speaking, a small business can acquire this type of coverage for less than the cost of a typical insurance policy.
Various types of fidelity bonds exist, each tailored for specific industries and risks. If you own a cleaning, HVAC, or plumbing company that frequently works in client homes, consider a third-party fidelity bond product such as a business services bond that protects your customers from theft committed by your employees while on the job.
Fidelity bonds serve as a valuable safeguard for businesses, helping to reduce financial losses and promote professionalism and accountability throughout the workplace. Learn more about this essential coverage by contacting a trusted surety bond provider to discuss your options and the application process. You may combine this protection with a commercial crime policy for more comprehensive theft and fraud coverage.
Fraudulent Activity
Fidelity Bonds protects your business from any fraudulent activity committed by employees. This includes forgery, stealing money or other assets, tampering with customer records, and other illegal acts.
Fidelity bonds come in a variety of forms to suit your needs. One popular type, an employee theft bond, covers a designated list of employees provided by the company and can be renewed each year with new hires added automatically. You can also purchase a business service bond, which protects clients when your employees work at home or office and reimburses them for stolen items.
Another common type of fidelity bond is a government bond, which protects against fraud committed by federal, state, or local government employees. These types of bonds are typically required by law or included in contracts with specific customers.
Financial Loss
Fidelity Bonds, which are insurance policies, cover losses from theft or property damage that regular business liability or workers’ compensation coverage doesn’t typically pay for. This includes employee dishonesty, forgery, and embezzlement. Any business with cash or valuable equipment should consider fidelity bonds. Also, any company that regularly has unsupervised access to clients’ homes or offices might also need a fidelity bond.
A client might require your business to obtain one of these bonds before they award you a contract. For instance, janitorial services and cleaning companies often needed to buy a fidelity bond because of the risk that an employee could steal jewelry or other valuables from a client’s home or office. Different types of fidelity bonds include business service or third party, fidelity bonds, and ERISA bonds (required by the Employee Retirement Income Security Act). Then, blanket position and position schedule fidelity bonds offer general or specific coverage.
