insurance Policies

What is Fidelity Bond Insurance?

Fidelity bond insurance is a special kind of business insurance. It protects your business from several fraud cases, including forgery, theft, physical loss, and other misconduct. As a result of delinquency by employees, some fidelity bonds protect the businesses against physical loss and monetary.

Every business owner considers insurance as a management strategy. It protects their businesses from several things which are caused by the employees’ misconduct. It is also useful in managing the unimaginable risk of some possible embezzlement, fraud, and theft.

How Much Does a Fidelity Bond Insurance Cost?

Fidelity bonds can be very expensive due to different circumstances. It will cost around 1%-3% of the bond’s premium coverage full amount every year.

For example, if you take $20,000 for a bond. Then it will cost you $200-$600 per annum. Other factors may affect the cost. It affects the coverage you need or the number of workers you want to cover.

Most bond insurance can cost you around 2% of the total amount every year. This amount may vary in several circumstances.

Why Do I Need a Fidelity Bond?

A fidelity bond is useful for managing the risk which is caused by the employees. Besides, it can protect your business from fraud, physical loss, theft, etc. Becoming bonded may implant trustworthiness in your clients and customers.

For big businesses, fidelity insurance can help you to understand your clients and customers more effectively. Besides, it will help you to become a friendly and trusty businessman. This is why you need fidelity bond insurance.

What are the Main Types of Fidelity Bonds?

There are three kinds of major fidelity bonds. They are

  • Business service bonds

  • Employee dishonesty bonds

  • ERISA bonds

All types of bonds have been briefly described below to understand better at a glance:

Business Service Bonds: At your client’s location, business service bonds can help you to prevent any misconduct by your employees’ performance to your customer. This bond will protect your client from any kind of theft or harmfulness while executing a service in private locations.

Business services bonds are currently the most common bonds. This bond is called in many ways. They are

  • Cleaning service bonds

  • Janitorial service bonds

  • Moving company bonds and many more

Employee Dishonesty Bonds: Employee dishonesty bonds can protect your businesses from dishonest and harmful employees. It is bought to protect employees against any type of misconduct which is directly involved in the business.

This bond is like a traditional business policy. Because an employee dishonesty bond works differently than most other fidelity bonds. A company pays the coverage to cover the losses for any misconduct from the employees.

ERISA Bonds: ERISA bonds can protect your retirement asset. It helps you to prevent any unnecessary misconduct by any employee. Besides, it protects those employees who can directly access retirement assets.

Several other bonds will help you with any unnecessary misconduct. They are

  • Blanket bonds

  • Schedule bonds

A brief description of these bonds has been given below to know better:

Blanket Bonds: Blanket bonds can cover all the workers and employees of a company. Non-profitable and big companies that have a lot of employees bought the bond. This is why it is called a blanket bond.

Schedule Bonds: Schedule bonds are bought for identified or specific employees. These workers and employees generally manage the largest transaction of the company. Also, they have a bigger responsibility.

There are several fidelity bond insurances, which will help you to prevent any kind of harmfulness to the company from the employees.

What are First-Party and Third-Party, Fidelity Bonds?

Fidelity bonds could be first-party bonds or third-party bonds. Most of the bonds have been mentioned above are first-party bonds. First-party bonds can protect your business from your employees.

However, if your business has a third party or subcontractor, these bonds can help your business from any outsider. These are the employees that you have hired by a contract.

For example, finance-related companies or banks typically need third-party employees to buy third-party bonds. In this way, they can save from any unnecessary losses.