Fidelity Bonds Guide

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What is a Fidelity Bond?

A fidelity bond is akin to a type of insurance that protects a company and its customers from financial loss due to dishonest acts by employees. The bond provides coverage for losses of money, securities, and other property resulting from theft or embezzlement. It is typically purchased by the employer and may be required by a financial institution or other organization with which the employer conducts business.

How Does a Fidelity Bond Work

If an employee commits a covered act, the employer can make a claim to the bond issuer for reimbursement of their losses. The bond issuer will then investigate the claim and, if it is determined that the employee did in fact commit a covered act, will compensate the employer for their losses up to the limit of the bond.

The bond is usually written for a specific period of time and can be renewed when it expires. The cost of the bond is based on several factors, including the type of business, the number of employees, and the amount of coverage desired.

Fidelity Bonds for Bonding Employees

Business Services Bond - This protects your customers from dishonest acts by your employees such as theft. Once business owners have this bond they often advertise “bonded employees” to put their clients mind at ease.

Employee Dishonesty Bond - This is a common type of employee bonding that protects employers from their own employee's dishonest acts such as theft, embezzlement, and forgery.

Janitorial & Cleaning Bond - This type of bonding of employees specifically protects the clients of janitorial and cleaning services.

Financial Institution Bond - This type is used specifically to bond employees of financial institutions such as banks and insurance companies and provides protection from employee dishonesty.

Bonding an Employee Benefit Plan

ERISA Bond - Allows you to have employee benefit plans and protects the participants and beneficiaries from fraud.

Surety Bond vs Fidelity Bond: How Are They Different?

The main difference between fidelity and surety bonds is that surety bonds are required (usually by the government) and are legally binding while Fidelity Bonds are voluntary. You can read our guide to learn more about how surety bonds work.

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