AMERICA'S LEADING PROVIDER FOR SURETY BONDS
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Fidelity Bonds
Not required by any government agency but instead purchased by businesses to protect against employee dishonesty or theft. Also called business services bonds.
Fidelity bonds, commonly referred to as employee dishonesty or business services bonds, are a class of surety bonds that provide protection to customers from theft when a business service provider has access to their personal or business property. Fidelity bonds are generally not required by any government entity, but instead by customers looking to hire a business service provider. Fidelity bonds protect a business and/or a third party (customers of the business service provider) from financial harm resulting from employee theft. Generally speaking, fidelity bonds can provide two types of coverage: 1st party coverage and 3rd party coverage. 1st party coverage protects businesses from theft from their employees, while 3rd party coverage protects the business’s clients from employee theft while employees are working on the client’s premise.
Fidelity bonds are most often required by customers of a business service provider when the service provider has access to their business or personal property. For example, the owners of an office building may require the building’s janitorial services company to purchase a fidelity bond before awarding them the contract. If a janitor were to make off with a building tenant’s jewelry box, the janitorial company’s fidelity bond would provide compensation for the loss.
As mentioned above, fidelity bonds are most often required by private businesses. However, there are some instances where government agencies may require a business to obtain fidelity coverage. Certain financial services companies must obtain a fidelity bond as a prerequisite to obtaining a business license. Although these requirements are rare, it is important to note that not all fidelity bonds are required by private entities.
As mentioned above, fidelity bonds are most often required by private businesses. However, there are some instances where government agencies may require a business to obtain fidelity coverage. Certain financial services companies must obtain a fidelity bond as a prerequisite to obtaining a business license. Although these requirements are rare, it is important to note that not all fidelity bonds are required by private entities.
By obtaining fidelity bond coverage, business service providers can help brand themselves as honest and reputable. Oftentimes, businesses will seek to purchase a fidelity bond prior to bidding their services to potential customers. Consumers are acutely aware of the risk of theft when bringing an outside party into their home or work environment, and that risk is only amplified when the service is performed when the consumer is away from the premises. Businesses with fidelity coverage can assuage these fears by assuring their clients that they will not suffer financial losses if theft of property were to occur.
To avoid claims on a Fidelity Bond, businesses and their employees must not steal the personal or business property of their clients. Additionally, businesses should ensure they have proper controls in place to help prevent theft from occurring. Below are controls businesses can implement to avoid theft from occurring:
● Require countersignatures on checks over a set limit
● Segregate banking duties (account reconciliation, check signing, deposits) amongst different employees
● Perform background checks on all employees
● Require countersignatures on checks over a set limit
● Segregate banking duties (account reconciliation, check signing, deposits) amongst different employees
● Perform background checks on all employees