What is Employee and Third Party Dishonesty Bonds?
Employee and third party dishonesty bonds, also known as fidelity bonds, protect businesses from financial losses caused by dishonest acts such as theft, fraud, or embezzlement committed by employees or third parties. These bonds act as a form of business insurance that helps safeguard company assets and maintain trust with clients and partners.
Who Needs It
Any business that handles money, sensitive information, or valuable property may benefit from this type of bond. Common industries include:
- Financial services and accounting firms
- IT and cybersecurity providers
- Janitorial and cleaning services
- Staffing agencies and contractors
- Retailers and wholesalers
Clients and government contracts may also require these bonds as part of doing business.
What It Typically Covers
Employee and third party dishonesty bonds usually cover losses resulting from:
- Theft of money, securities, or property by an employee
- Forgery or fraudulent financial transactions
- Embezzlement or misappropriation of company assets
- Dishonest acts by a third party under contract
These bonds may apply whether the dishonest act happens on the employer’s premises or while working offsite.
Common Exclusions and Limitations
While these bonds offer protection, they typically do not cover:
- Acts committed by company owners or executives
- Losses discovered after the bond term ends
- Claims not reported within the required timeframe
- Losses due to accounting errors or negligence (non-criminal)
Always review the policy details to understand what is and isn’t covered.
Factors That Influence Cost
The cost of employee and third party dishonesty bonds depends on several variables, including:
- Size of your business and number of employees
- Amount of coverage requested
- Industry risk level
- Claims history or prior losses
- Internal controls and background check practices
Stronger risk management procedures may help reduce the cost of your bond.
Proof of Insurance & Compliance
Some states or industries may require proof of a dishonesty bond to comply with licensing or contract obligations. Even when not required, having a bond can strengthen your business credibility and may be requested by clients or partners. Always check your local regulations and industry requirements.
How to Get a Quote
Getting a quote for an employee and third party dishonesty bond is simple. Provide basic business information, including the nature of your operations and number of employees. We'll guide you through the process and help you choose the right coverage for your needs. Get a quote today.
Frequently Asked Questions
What is the difference between a fidelity bond and a dishonesty bond?
They are often used interchangeably. Both protect against employee theft or fraud, but "dishonesty bond" may also cover third-party contractors.
Is this bond required by law?
It depends on your industry and location. Some contracts or licenses may require it, but it's not universally mandated by law.
Does this bond protect against data breaches?
Not directly. It may cover losses from employee fraud involving data, but cyber liability insurance is better suited for data breaches.
Can I get coverage for independent contractors?
Yes, if the bond includes third-party dishonesty coverage. Be sure to confirm the bond includes non-employee personnel.
How long does coverage last?
Bond terms vary but often last for one year. You can renew annually to maintain continuous protection.
Still have questions? Talk to a local insurance expert.