What is Fidelity Bonds?
Fidelity bonds (sometimes called employee dishonesty coverage) protect organizations against financial loss caused by dishonest acts of employees, such as theft, embezzlement, or forgery. These bonds are a form of crime insurance that sits alongside other protections like commercial liability and property coverage to address internal exposures rather than third‑party injury or property claims.
Who needs it
Nonprofits, small businesses, clubs and associations, financial institutions, retail operations, contractors who handle client funds, and any organization that trusts employees with money or sensitive assets commonly purchase fidelity bonds. Firms that already carry general liability or event liability may add fidelity coverage to complete their risk management program. For program and product options that serve different organization types, see Fidelity Insurance (Employee Dishonesty Coverage).
What it typically covers
Fidelity bonds generally cover direct financial loss from dishonest acts by employees. Coverage can include loss of money, securities, inventory, or electronic fund transfers. Some policies extend to theft by third parties, forgery, or computer fraud. Limits, waiting periods, and specific coverages vary by form and insurer.
A common add-on is excess fidelity coverage to raise limits above a primary bond when organizations face larger exposures or higher concentrations of assets: Excess Fidelity Bonds.
Common exclusions or limitations
Typical exclusions include intentional loss by owners or partners, fraud by named insureds, contractual liability, and certain cyber-related acts unless specifically endorsed. Policies often require proof of loss, prompt reporting, and cooperation in investigations. Underwriting factors may restrict coverage for high‑risk activities or wrongful acts involving related parties.
Factors that influence cost
Premiums are influenced by underwriting factors such as the size of payroll, number of employees with financial duties, internal controls, background checks, and prior loss history. Industry type, exposure to cash handling or electronic funds transfer, and limits selected also affect pricing. Strong internal controls and formal accounting procedures typically reduce cost.
Organizations with specialized needs — for example, those that hold customer funds or manage high‑value inventory — may consider tailored programs like the Third Party Fidelity Bond Program to address unique exposures.
Proof of insurance & compliance
Many clients or regulators request certificates of insurance or the actual bond form as proof. Employers should keep loss runs and copies of policies accessible for audits or contract compliance. Certificates will show limits, policy period, and covered perils but may reference endorsements or exclusions that require review.
How to get a quote
Start by gathering basic information: number of employees, descriptions of financial duties, existing internal controls, payroll figures, and any past losses. Compare forms and limits rather than prices alone. If you prefer personalized assistance, talk to your agent.
Frequently Asked Questions
Do fidelity bonds cover theft by volunteers or contractors?
Coverage varies by policy. Some bonds extend to volunteers or independent contractors if they are listed or specifically endorsed; others require separate coverage. Always check the policy definitions.
How quickly does a claim need to be reported?
Policies require prompt reporting and cooperation. Reporting timeframes can vary, so notify your insurer as soon as a suspected loss is discovered and follow claim instructions in the bond.
Can an organization increase limits if exposure grows?
Yes. Many insurers offer higher limits, excess fidelity coverage, or tailored programs to match increased exposure. Changes usually require updated underwriting information.
Still have questions? Talk to a local insurance expert.