Fidelity Surety Bond for Businesses

Different types of businesses benefit from being covered by different types of fidelity bonds. The two broad categories of voluntary fidelity bonds are “business services bonds” and “employee dishonesty bonds.”

Employee Dishonesty Bonds

All business owners with employees who have access to cash, securities, or other company property could benefit from purchasing an employee dishonesty bond—a “first party” fidelity bond. The bond will replace the amount stolen up to the coverage limit (minus any deductible).

Business Services Bonds

Business owners who send employees out to do work at a client’s home or place of business need a business services bond. This is a third-party fidelity bond protecting the business owner from liability for an employee’s misdeeds that cause the client financial harm. These are sometimes referred to by the type of business purchasing the bond—for example, “janitorial services bonds,” “Landscaper’s bonds,” etc.

Even if you’re not convinced that you need a business services bond, your business will benefit from the competitive advantage it will give you. Potential customers will be impressed that you have gone to the expense of protecting them and are likely to view you as a responsible business owner.

There are only two parties to a fidelity bond agreement: the business owner and the company underwriting and issuing the bond. Employee dishonesty bonds and business services bonds both involve a legally binding contract between the business owner and the company issuing the bond. That agreement spells out what losses are covered, the coverage limits, and other details.

When a covered loss occurs, the business owner can file a claim against the fidelity bond to obtain compensation for the loss suffered by the business or by a client. Note that in some states, however, no claim can be submitted unless the employee who committed the dishonest act has been convicted of a crime.