Any business with employees who handle sensitive financial or personal information could benefit from a fidelity bond, sometimes called commercial crime insurance. Fidelity bonds provide coverage when an employee:
Fidelity bonds are not required by law. However, your clients might request fidelity bonds to protect their assets from your employees, especially if you work as an independent contractor in finance or banking.
For example, an IT consulting firm or a financial planner might need a fidelity bond to fulfill a client contract. It’s typically the contractor’s responsibility to secure fidelity insurance coverage.
Read more about fidelity bond coverage.
First-party fidelity bonds protect your own small business against criminal acts by dishonest employees, including embezzlement. The more access your employees have to your business’s finances, the greater the risk. A first-party fidelity bond can provide financial reimbursement after an employee steals from your company.
A third-party fidelity bond could reimburse 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.
A business service bond is a type of fidelity bond that protects clients when your employees visit their home or office. If a dishonest employee steals their personal property, the bond would provide reimbursement for the loss.