Fidelity Bonds for Small Businesses
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What do fidelity bonds cover?

Fidelity bonds cover theft, fraud, and other dishonest acts by employees that affect your business or your clients.

Fidelity bonds protect against dishonest employees

Also called commercial crime insurance or an employee dishonesty bond, fidelity bond coverage protects against employee theft, including:

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Fraudulent activities
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Property theft
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Embezzlement
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Theft of employee benefits

Fraudulent activities

If an employee commits forgery, identity theft, or another fraudulent act to steal money from a client, your business could find itself facing a significant financial loss.

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.

Embezzlement

Embezzlement and other misappropriations of funds are risks for companies whenever partners or employees have access to company finances. If an employee writes a company check for their own gain, a fidelity bond can reimburse your company for the loss.

Example: 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.

Property theft

Your employees might have unsupervised access to clients' homes and offices, which brings the risk of theft of jewelry and other valuables.

Example: An employee at a house cleaning company steals jewelry from a client's home during a cleaning. A type of fidelity bond called a janitorial bond or business services bond would reimburse the client for their loss.

Theft of employee benefits

Companies with employee benefit plans must comply with the Employee Retirement Income Security Act (ERISA) by purchasing an ERISA fidelity bond, also called a fiduciary bond. This bond protects the beneficiaries of a retirement plan by reimbursing them for losses due to fraud or dishonesty.

Example: A manager 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.

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Fidelity bonds do not cover:

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Illegal acts by non-employees
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Damaged client property
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Failure to deliver contracted services
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Data breaches and cyberattacks
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Work errors and oversights

Illegal acts by non-employees

Fidelity bonds only protect your business and clients from illegal acts committed by your employees. If someone outside your business steals company property or funds, commercial property insurance would cover the loss.

Example: A thief breaks into a restaurant and steals money from the cash register. The restaurant’s business owner’s policy (BOP), which includes both commercial property insurance coverage and general liability insurance, would provide compensation for the amount that was stolen.

Failure to deliver contracted services

Surety bonds reimburse a client if your company fails to deliver promised services. If your business fails to complete a project or adhere to regulations, a surety bond protects the client against losses.

Example: A janitorial services company lands a six-month contract at a large office complex. However, after one month, the company loses several key employees and can no longer keep up with demand. The janitorial company’s surety bond reimburses the owner of the office complex for the amount it paid for undelivered services.

Errors and missed deadlines

Professional liability insurance guards against lawsuits brought by clients claiming your work was unprofessional, erroneous, incomplete, or late. It's also called errors and omissions insurance (E&O).

Example: A client asks a computer repair business to fix their laptop by a specific date, but the business fails to meet the deadline. Because of this, the client cannot give a presentation on time, so they file a lawsuit against the repair company. The legal costs are covered by its professional liability insurance policy.

Damaged client property

Businesses that work with clients’ computers and other property run the risk of accidental damage. If an employee drops or breaks client property, general liability insurance the cost of replacement or repair.

Example: A web developer borrows a client’s laptop to work on a project. However, the developer spills a drink on the laptop, which breaks the keyboard. Their business owner’s policy (BOP), which includes general liability insurance coverage, pays for the repair.

Data breaches and cyberattacks

Cyber liability insurance helps companies recover from data breaches and cyberattacks. It can pay for customer notification costs, credit monitoring services, and more.

Example: A cyberattack targets a web design company and exposes its clients' credit card numbers. The company’s cyber liability policy pays for the cost of notifying the affected customers. It also provides them with credit monitoring services for several years following the attack.

Other policies recommended for small businesses

Insureon’s licensed agents most often recommend a business owner’s policy. This type of insurance bundles general liability insurance with commercial property insurance. It covers common third-party claims, as well as damage to your own business property. Not all businesses qualify – but those that do gain broad coverage at a discount.

Most states require workers’ compensation insurance for businesses that have employees. This policy helps pay for medical expenses related to a work injury or illness. Even sole proprietors should consider carrying this coverage, as health insurance providers can deny claims for injuries related to work.

Looking for different coverage? See more policies.

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