Fidelity Bonds vs. Commercial Crime Insurance: Which is Right for You?

Having the right insurance coverage can give you peace of mind to focus on serving your customers. So, when it comes to protecting against fraudulent acts, there are two standard options: fidelity bonds and crime insurance. While fidelity bonds and crime insurance are nearly the same, there are a few differences to understand to help you choose the proper coverage.

What are Fidelity Bonds?

Fidelity bonds, often called “employee dishonesty bonds,” are a form of insurance designed to protect businesses from specific fraudulent acts. That’s why fidelity bonds are thought of as crime insurance; they protect against crimes committed by another person.

There are different types of fidelity bonds to consider:

• Business services bonds: This product is the most common type of fidelity bond, which is also called business bonds or janitorial service bonds. It protects customers and clients. Suppose a customer loses money or personal property due to a dishonest act by your employee. In that case, the bonds will allow you to reimburse your customer.
• Employee dishonesty bonds: These bonds protect companies from an employee’s dishonest activities, including stealing money or property.
• ERISA bonds: The Employee Retirement Income Security Act (ERISA) of 1974 demands that trustees of retirement plans have fidelity bond coverage. This bond protects the money in that plan from the plan managers misusing funds in any way, such as embezzlement, theft, or misappropriation of plan assets.

What is Crime Insurance?

Commercial crime insurance offers broader coverage compared to fidelity bonds. It includes protection against employee theft but also covers crimes committed by third parties. This larger scope makes crime insurance more versatile as long as the policy covers the specific type of crime. Critical elements of crime insurance include:

• Employee Dishonesty: Covers against theft, forgery, or embezzlement by employees.
• Theft of Money and Securities: Protects against theft by outsiders, including robbery and burglary.
• Computer Fraud and Funds Transfer Fraud: Addresses modern threats involving digital transactions.

While commercial crime insurance protects against some computer crimes, most businesses should consider purchasing cyber liability insurance. Healthcare businesses are often targets of cyber criminals because they handle both personally identifiable information and protected health information.

Key Differences

The primary difference between fidelity bonds and commercial crime insurance is in the scope and breadth of coverage. Fidelity bonds are limited to specific actions, whereas crime insurance offers a broader range of protection, extending to acts committed by people outside the organization. This distinction makes crime insurance a more comprehensive choice for businesses aiming to mitigate various risks.

Choosing the Right Coverage

Recognizing the differences between these two types of coverage is crucial for business decision-makers. By understanding each option’s specific protections, you can make an informed decision for your risk management strategy. Opting for crime insurance may provide peace of mind with broader coverage. However, fidelity bonds might be sufficient for your business’s needs.

A trusted insurance broker can help you evaluate your specific situation and guide your decision that safeguards your assets effectively.