Fidelity bonds are a type of business insurance that covers employers from losses due to fraudulent or dishonest actions of their employees. Despite being referred to as “Bonds”, fidelity bonds are a type of business insurance. Fidelity bonds cover revenue and securities losses due to theft, burglary, fraud, forgery, malicious fire, and disappearance.
Types of Fidelity BondsThese bonds are divided into two types: first party and third party. First party fidelity bonds protects your business from malicious actions (theft, fraud, etc.) from direct employees. Conversely, third party fidelity bonds cover malicious actions committed by third party employees like independent contractors and consultants.
A Surety Bond insures against the loss of money in an agreement between two parties wherein one of the party does not fulfill their obligation. This scenario typically involves a contract between the two parties. In addition to covering the loss of money as a result of an unfulfilled obligation, surety bonds also insure theft by businesses that enter your home on a regular basis.
Surety vs. Fidelity Bonds
Different from a fidelity bond, a surety bond policy states that the third party must be convicted of the crime before you are reimbursed. However, if you are reimbursed, the amount can potentially be in full. Conversely, with a fidelity bond, there does not need to be a conviction and you will only be reimbursed up your policy’s limit.
Which Works Best For You?
Need help deciding which type of bonds work best for your situation? While both can applied to your business and personal practices, this can be a costly and somewhat unnecessary venture. Know which bonds to invest in can be the difference between losing money and protecting what’s yours. Don’t hesitate to speak with our insurance agents to determine which polices will keep more protected from wrongful acts.