Fidelity bonds

Financial advisors and planners often have direct access to clients' banking accounts, which can be risky.

For example, an advisor at a financial institution forges a client’s signature on a check and steals thousands of dollars. A fidelity bond would reimburse the client for the stolen money, up to the coverage amount.

Because of their line of work, IT professionals have the ability to obtain and misuse confidential client information that could cause a financial loss for your small business.

For instance, an IT consultant at your company overbills a customer and steals the excess. Once the crime is revealed, your company’s fidelity bond provides reimbursement for the loss.

Healthcare professionals work with patients during their most vulnerable times. If a patient is taken advantage of by an employee, a fidelity bond would protect your organization.

For example, if a home healthcare aide steals a laptop from a patient during their visit, a fidelity bond would compensate the client for this loss.

Cleaning professionals are given access to spaces with valuable information or goods. If an employee takes advantage of the client's trust and steals something, a fidelity bond would compensate your client.

For example, if an employee at a house cleaning company steals jewelry from a client's home during a cleaning, the company would be held liability. A type of fidelity bond called a janitorial bond or business services bond would reimburse the client for their loss.

Management consultants directly handle retirement and other pension plans, which has its risks.

For instance, a consultant who handles a company's 401(k) illegally transfers money from the plan to their personal bank account. An ERISA bond would reimburse the plan's beneficiaries for the loss.

Fidelity bonds can be broken down into two categories: first-party bonds, which protect your own business against losses, and third-party bonds, which protect your clients against losses.

The most common types of fidelity bonds purchased by small business owners include:

• Employee dishonesty bond: Reimburses your clients in the event that an employee misuses Social Security numbers, credit card numbers, or other financial or personal data. It’s commonly required in client contracts with consultants or independent contractors, especially in finance and banking
• Business service bond: Protects clients when your employees visit their home or office. If a dishonest employee steals their personal property, the bond would reimburse the client for the loss
• Janitorial bond: Clients will often require cleaning companies to secure this bond before allowing their employees onto their property. It compensates clients in the event a janitor or house cleaner steals from them

A typical insurance policy, such as general liability insurance, pays out a claim to your business when something goes wrong. Fidelity bonds work differently. If one of your employees steals from a client, the bonding company will instead reimburse the client directly.

Unlike insurance, you must then pay that amount back to the insurer or bonding company. A fidelity bond can be viewed more like a line of credit than a form of insurance.

Fidelity bonds are a type of commercial crime insurance, which is a general term for any coverage that protects businesses and their clients financially against crimes. Other forms of crime insurance include:

Commercial property insurance, a crime insurance policy that reimburses businesses for stolen and vandalized property. It also protects against fires and other types of property damage.

Cyber liability insurance, a policy that protects your business financially after a ransomware attack or other cybercrime. It also helps pay for accidental data breaches caused by mistakes and oversights.

Employee dishonesty coverage is another term for a fidelity bond. However, it can also refer to an endorsement for commercial property insurance that protects your own business from employee theft. Small businesses can often add this coverage to a business owner's policy (BOP) as well.

Chat with a licensed insurance agent to find out which insurance coverage best fits your business.

Complete Insureon's easy online application today to compare fidelity bond quotes from top-rated U.S. carriers. Once you find the right bond for your small business, you can begin coverage in less than 24 hours.