Using Fidelity Bonds to Cover Employee Fraud
Errors and omissions insurance protects your business from losses caused by negligence or honest mistakes, but these policies won’t reimburse you for any willful or malicious acts committed by your employees. And, although all employers want to trust their work forces, the simple truth is that many employees commit fraud against their businesses and customers.
Fidelity bonds are a type of insurance coverage that businesses can use to protect themselves from employees who engage in theft or other fraudulent acts.Additionally, some employers may be required to purchase certain types of fidelity bonds to comply with state or federal regulations.
Overview of Fidelity Bonds
Despite its name, a fidelity bond is a form of insurance and not a financial asset. It may seem strange to purchase insurance for your employees’ intentional misdeeds, but high levels of trust can actually increase your risk exposures.
Employees with regular access to financial information, safes, cash registers or valuables can easily commit fraud,especially if their employers’ don’t consider the possibility of intentional fraud. Fidelity bonds can also protect your businesses from losses caused by a third-party contractor.
Insurance carriers determine the rate for fidelity bonds based on the amount of coverage, the number of employees included in the policy and your business’s industry. However, rates can also vary depending on the type of fidelity bond that’s being purchased.