Fidelity Bonds and Business Insurance
What is a Fidelity Bond?
A fidelity bond is a type of commercial insurance that provides protection for a business in the event that the business’s employees commit fraudulent acts. Although they are called bonds, fidelity bonds are a type of insurance that businesses should consider as a part of their risk management strategy.
If a business’s employees commit fraud, the business is generally liable for their actions. Fidelity bonds act as a type of insurance that protects the business in the event they are held liable for an employee’s actions.
What Businesses Need Fidelity Bonds?
Although any business can apply for a fidelity bond insurance, there are a few industries where businesses generally use them:
- Insurance companies
- Financial Institutions
- Brokerage firms
These types of companies tend to invest in fidelity bonds for a few reasons:
- Size: these types of companies are generally large and cannot keep track of what all their employees are always doing.
- Requirements: regulations generally dictate that these types of companies carry coverage that is proportional to their net capital.
- Business: the nature of these companies’ businesses leaves their customers open to fraud, theft and forgery.
Fidelity bonds cover the losses incurred by being held liable for any of these actions by their employees.
The Types of Fidelity Bonds
Fidelity bond insurance can come in many forms, but there are three major types used by businesses:
- Business services bonds: these protect against the loss of a customer’s money or property due to dishonest acts committed by an employee.
- Employee dishonesty bonds: these protect against losses incurred by the business due to the dishonest actions (fraud, theft, etc.) of an employee.
- ERISA: ERISA bonds are different in that they protect the employees of a business, not the business itself. ERISA protects an employee’s benefit, pension or retirement plans from dishonest actions of the person at the company who manages them.
Obtain Fidelity Bond Insurance in Minnesota
If you are a business in Minnesota who needs a type of fidelity bond to act as insurance for your business, contact the commercial insurance experts at The Patrick J. Thomas Agency today.