Fidelity Bond Solutions

Why Is A Fidelity Bond?

A fidelity bond is a form of business insurance that offers an employer protection against losses that are caused by its employees’ fraudulent or dishonest actions. These are a type of insurance that protects a business from any wrongdoing on the part of an employee. They are often used to cover things such as theft and property damage, but there are different types of fidelity bonds that also cover things such as embezzlement and fraud from higher-ranking employees within a major company. This form of insurance can protect against monetary or physical losses. They are typically designated as either first-party or third-party; first-party fidelity bonds are policies protecting businesses from wrongful acts committed by employees, while third-party fidelity bonds protect companies from similar acts by individuals employed on a contract basis.

First-Party and Third-Party

There are two types of fidelity bonds: first-party and third-party. First-party fidelity bonds protect businesses against intentionally wrongful acts (fraud, theft, forgery, etc.) committed by employees of that business. Third-party fidelity bonds protect businesses against intentionally wrongful acts committed by people working for them on a contract basis (e.g., consultants or independent contractors). In business partnerships, it is the responsibility of the business working as a contractor or subcontractor to carry third-party fidelity bond coverage, though it is typically the other party who requests or requires such coverage. In many cases, businesses in finance or banking require their contractors to carry third-party fidelity bond coverage to prevent losses from theft.

Fidelity Bond Types

Even though a fidelity can all be categorized as either first-party or third-party, there are different types, within these categories. These different types include:

ERISA – ERISA is the Employee Retirement Income Security Act, which requires a business with a pension plan to purchase a fidelity that is equal to 10 percent of the plan’s total assets. For example, a pension plan that is worth $50,000 would require an ERISA bond that is worth $5,000. The maximum amount that can be purchased is $500,000. In any event, this bond protects a company should an employee embezzle retirement funds. Call us to learn about ERISA requirements.

Business Service – A business service bond protects a company that requires employees to enter their clients’ homes such as home health care providers, pet sitters, and cleaning services. Should any kind of theft occur in a client’s home, the bond would payout to the business who would then be responsible for reimbursing the client for the theft.
Dishonesty – When someone asks, “What are fidelity bonds,” this is usually the kind of bond that is mentioned. The dishonesty type covers businesses who are victims of embezzlement, theft or any kind of wrongdoing on the part of an employee from within the business.

Dishonesty Bonds – Can be either blanket coverage or scheduled coverage. Blanket coverage covers all employees within a company unless they are specifically excluded by request. Scheduled coverage covers only certain employees who can be covered for different amounts based on the risks they pose. Blanket coverage is ideal for large companies with large turnovers, while scheduled coverage is great for smaller companies that have certain employees who handle several important responsibilities.

Why Crestway Group

The Crestway Group (CWG) can help your company with its fidelity bond coverage needs is what we love to do. We can help you with all your needs. Whether you need a third party, an ERISA, or want to better understand fidelity bond requirements we are here to serve you! The price will depend on the nature of your business and how much of a risk your employees might be, but most bonds are relatively inexpensive compared to other forms of insurance. Contact our a team member in Bond Division to speak with a bonding specialist we will be happy to assist you.