As a business owner, you have decisions to make every day that can have a direct impact on the success of your business. Hiring valuable employees is necessary, but what happens when your ideal candidate has a questionable background? What if you must hire a professional with critical fiduciary responsibilities? You can get peace of mind by purchasing a fidelity bond from an independent agent in the Trusted Choice® network.
The Trusted Choice network includes independent agents in over 22,000 member agencies throughout the U.S. Unlike other “captive” insurance agents, independent agents have the ability to compare prices and quotes and help you find the right fidelity bonds and other business insurance for your needs. For assistance contact a local independent agent in the Trusted Choice network today.
Types of Fidelity Bond Insurance
A Trusted Choice independent agent can help you identify which type of surety and fidelity bonds will best meet your needs. Analyzing your unique risk factors will help you determine what kind of protection you need. Here are a few ways to protect your business:
- ERISA bonds: If you have a pension plan, the Employee Retirement Income Security Act requires that you purchase a bond equal to at least 10% of the total plan assets. For example, if your total assets equaled $50,000, you would only need a $5,000 ERISA fidelity bond. Keep in mind that the maximum offered is $500,000. This type of fidelity bond has no deductible and is listed under the name of the plan. If an employee who handles pensions embezzles retirement funds, you’re protected.
- Business service bonds: If you run a business where your employees enter client homes, this bond provides benefits if theft occurs at a customer’s house. The claim will be paid to you, which can then be used to reimburse your client or customer.
- Dishonestly bonds: This is the type of bond that fits within the standard fidelity insurance definition. There are two types of dishonesty bonds:
- Blanket coverage: With this policy, all employees are covered for the same amount unless specifically excluded by request. This type of policy is great for large businesses or those that have high turnover rates.
- Scheduled coverage: This type of bond will only cover certain employees who can be bonded for different amounts depending on the risk you face. This is ideal for businesses where certain employees handle various important responsibilities.
What Is a Fidelity Bond?
If you have a concern about the security of company funds or other business property in the hands of your employees, you may be wondering: "What is fidelity bond coverage?"
Fidelity insurance is a type of business insurance that provides protection from monetary or property theft or other employee misconduct that can result in a financial loss. In many cases, these bonds are optional and can provide peace of mind if you have a concern about employees who have access to company assets. In other situations, such as when you have a trustee of a pension plan on staff, the fidelity bond may be required.
The Difference Between Surety and Fidelity Bonds
When applying for a fidelity bond, you may notice surety and fidelity bonds are often grouped together. While both bonds work together to provide peace of mind, their uses differ considerably.
Fidelity bond coverage is meant to protect an employer and is usually a two-party agreement. A surety bond is a three-party agreement built to provide an intervention if a contract can’t be fulfilled. With a surety bond, the first party is the surety company, which reimburses the project owner (the second party) if obligations aren’t met. The third party is the contractor. Remember, an independent contractor won’t qualify for a fidelity bond, but may be eligible for a surety bond. Speak to your Trusted Choice member agent to see which bond works best for your specific situation.
Applying for a Fidelity Bond Policy
As a business owner, you can apply for a fidelity bond if you are hiring a fiduciary or a high risk employee. Some states require that businesses obtain fidelity bonds, but check your local laws for specific requirements. While you can apply for a fidelity bond if you are an employer, you can also recommend that your employee purchase a fidelity bond policy.
Self-employed individuals cannot quality for a fidelity bond. Most bonds are obtained through a surety company. To save time when researching various companies, contact a Trusted Choice member agent.
How Much Does a Fidelity Bond Cost?
The price of fidelity bond insurance depends on the type of business you run, how many employees you have, and the type of customers you serve. For example, a small consulting firm may purchase $1 million in blanket coverage and have an annual premium of less than $2,000. A business of the same nature that covers 50 employees may pay almost $4,000 per year. Coverage amount and deductibles also have an important role in determining costs. Typically, a bond will cost anywhere from .5 percent to 1 percent of the coverage your purchase.
Working with High-Risk Employees
Today, employers have incentives to work with high risk employees in the form of tax credits. These incentives help those with a checkered past to get back into the workforce, while also providing a financial perk to the hiring company. Employees that may qualify as "high risk" include:
- An ex-offender or someone with a police record
- An ex-addict who has gone through rehabilitation
- An individual with a poor credit score or who has declared bankruptcy
- A former member of the military who was dishonorably discharged
- An individual that lacks significant work history, or has been let go from a previous position
Fidelity bonds can provide insurance against some of the risks you may be concerned about when hiring employees that may have a felony charge on record, or other high risk markers. In some states, this coverage is free of charge for the first six months, as an additional incentive.
Making a Fidelity Bond Insurance Claim
Employee theft does happen, unfortunately. When money or property goes missing, it’s important to report the theft to your insurance company, even if you do not have proof that an employee was responsible. Many surety companies have very strict deadlines for providing information on a loss.
Understand what your bond covers before making a claim. Just like any insurance policy, a fidelity bond comes with exclusions and limitations. Once the claims process begins, the insurance company will launch an investigation and attempt to get all of the facts in order to process the claim.
Working with a Trusted Choice Member Agent
Employers that hire high risk individuals or employees who have critical fiduciary responsibilities can find themselves at a crossroads of opportunity and risk. A fidelity bond can provide a solution that satisfies both parties. If you aren’t sure where to get a fidelity bond that works for your business, contact an independent agent in the Trusted Choice network.
Independent agents who specialize in fidelity bonds can help identify your unique needs and find a bond that matches them. To protect your business from potential employee fraud and misconduct, contact a Trusted Choice member agent today for all your fidelity bond needs.