The fidelity bond program provides free insurance coverage up to $5,000 for at-risk job applicants. It is an essential step in reducing barriers to employment. An insurance policy known as a fidelity bond protects a company from financial losses brought on by workers’ dishonest or fraudulent behavior. There are many types of fidelity bonds.
Definition
Fidelity bonds offer coverage for acts of dishonesty and theft. They are a type of surety bond companies purchase to protect them from losses caused by defined individuals, such as employees who commit forgery, fraud, or theft. They are frequently obtained in addition to a commercial insurance policy to give an extra layer of protection and assist in lowering the expenses related to a loss. Several types of fidelity bonds are available, including first-party (or blanket) fidelity bonds that cover a company against harm caused by the intentional actions of all of its employees and third-party fidelity bonds that cover a business against the intentional actions of persons working on a contract basis for that business such as independent contractors or consultants. This type of coverage can be helpful because it allows a business to continuously monitor records and actions by those with whom it works to prevent fraud.
Coverage
In general, fidelity bonds cover any theft or dishonesty that causes financial or physical harm to a business. Because commercial property insurance policies do not cover a company’s money, securities, or other assets, and standard professional liability policies exclude intentional and dishonest acts, fidelity bonds often fill in the gaps these coverage types leave. Fidelity bonds also offer protection against the actions of third parties that a company may hire to work on its behalf. This type of coverage is more commonly found in specialized fidelity bond options. These bonding solutions assist in easing consumers’ concerns and promote trust since consumers are acutely aware of the potential of theft by a window repair professional or home health care provider operating on their property. However, these specific fidelity bond coverages require a higher premium and more rigorous underwriting.
Requirements
Fidelity bonds are often required by law or as a condition of doing business in certain areas. Enterprises frequently employ them to safeguard their clients against their workers’ dishonest behavior.
The types of fidelity bonds vary depending on the type of business in question, but most will cover the common forms of employee dishonesty like theft and embezzlement. Specialized fidelity bonds, such as ERISA, protect 401(k) plan beneficiaries from trustee dishonesty. More comprehensive fidelity bond policies may require a credit check, particularly for ERISA or business service bonds with high loss limit coverage amounts. In that case, a complete background report will be needed to determine the appropriate coverage amount. Some fidelity bonds have a fixed loss limit, while others have a deductible and maximum aggregate limit.
Types
Fidelity bonds are available in several types, each designed to address specific risks. There are employee dishonesty and business services bonds, which protect customers when employees of a company have access to their property (such as janitorial, cleaning, or HVAC companies). Other specialty fidelity bonds include ERISA bonds, which protect 401(k) and pension plans from financial loss due to the dishonest actions of plan managers, and official public bonds, which guarantee that specific individuals will faithfully perform their duties.
In most cases, a business owner will purchase a fidelity bond as part of their risk management strategy to protect them against losses caused by specified individuals’ fraudulent or dishonest acts. This type of coverage is precious for companies that handle customer assets, as it can help set them apart from competitors that do not offer the same level of protection. In addition, a fidelity bond can serve as a sign of integrity and trustworthiness that will also benefit a business’s reputation.
