Understanding What are Covered by Fidelity Bonds

The fidelity bond covers job seekers who are considered high-risk due to some factor in their personal background and who have been rejected by a commercial bonding company.

Fidelity bond may cover employees who are inherently possesses a higher risk due to a few factors on their personal life or those who have been declined request by commercial bonding companies. A fidelity bond can provide about one hundred percent insurance coverage and there is no deductible. Your employer will be completely covered from any financial or legal losses due to workers' incompetence and dishonesty. In most company, you'll get up to $30,000 coverage from losses. In some cases this amount may not seem much, but money is money, it is better to get some compensation than nothing at all.

The bond can be considered as incentive for you to hire specific elements of society, because they can be considered high risk or have low competency. For example, mining companies in some countries are expected to hire local population for certain percentage of their workforce. Hiring people only based by geographical location may carry some risks as they may not have the education, the honesty or the motivation to work in a mining company.
To cover the mining company from risks caused by bad employees, the country where the mining company located may agree to grant you fidelity bond, at least for a few years after the company starts the operation. In some cases the employer may get up to six months of free coverage, when certain requirements are satisfied. If the employer still thinks that it is necessary to extend the bond, then it is possible to do that, of course at full-priced premium.

You should be aware though that, the bond doesn't cover the following aspects in your business operation
- Accidents and job-related injuries
- It can be used as bail bonds in the court
- It is not applicable for self-employed individuals (one-man company)

How Fidelity Bond Works?

Fidelity bond is in essence an insurance for your business operation. It is often bought to cover business owners from all kinds of property or financial losses, caused by hiring incompetent or risky employees. Many fidelity bond services are also a traditional insurance company. As the result buying fidelity bond from your own insurance company may benefit you, because of the possibility of lower premium and extra perks. The bond covers you against failure during work, theft and financial losses. The covered employee can be determined by specific department or the entire company, certainly the premium needed for an accounting employee and a janitor is different, due to the unique risks involved for each workers.
Many fidelity bond companies will agree to cover up losses until up to $30,000 after an incident or accident. The bond may serve as an enticement for employers to hire hi-risk workers.
Bond coverage work this way,
The coverage is based by the nature of work and the value of related properties
Bonds can be issued until the maximum value. The increment of bond value is usually around $5000. The bond usually has no deductible amount. It will be implemented after the employee go to work for the first time. The bond contract is usually sent to your employer and it will be expire after six months.
This is the common way fidelity bonds work, however your company may enforce a unique requirements that wouldn’t be found elsewhere. Ask the salesperson, whether there is anything different with the fidelity bond program you want to apply. But still, trust your instinct, a fidelity bond company may give you a weird requirements, it could be a good idea to find another service. To know if something is unusual, you should check with several service before buying and find repeatable patterns.

What is Commercial Crime Policy?

First, it is necessary to know what is a Commercial Crime Policy. It is a different term for Fidelity Bond. Many brokers consider it is also a performance bond but it's not, it's actually a type of insurance policy that defends the company from employees' crime
Based on study performed by the ACFE (Association of Certified Fraud Examiners), U.S. organizations lost approximately seven percent of yearly profits to scam. According to the U.S. GDP in 2008, this number shows an astonishing number of losses of nearly $1 trillion among companies, it continues to increase in spite of higher focus on anti-fraud actions and latest statute law to fight fraud.
The Commercial Crime Policy covers the company from employee crime. Usually, underwriters and security firms are needed to get a Commercial Crime Policy, as it protects employer's financial situation when a bad employee causes damages through negligence or unscrupulous acts. Employee Dishonest Bonds or Fidelity bonds are often needed by private project owners and sometimes required by a few government projects. Its major protection is related to the employee theft. It will pay them for the financial losses, or on other properties directly caused by forgery or theft perpetrated by an employee. There are a few other arrangements that can be included or added in the Fidelity policy in protecting you from bad employees.

• Inside the company - Stolen money, safe burglary,sabotage and equipment thefts
• Outside the company - Equipment thefts and sabotage
• Electronics Frauds

Fiduciary Liability Insurance and Fidelity Bonds

Companies frequently offer workers benefit plans for helping to keep and attract qualified workers. These companies should understand about the liability exposures caused by the handling of this plan.
According to the provisions of the ERISA (Employment Retirement Security Act), the employee fiduciary benefit plan should work properly to profit both beneficiaries and participants.
Under Employment Retirement Security Act, a Fiduciary/Trustee will be held financially responsible for the any Welfare Plan or Retirement Plan in a company
Fiduciary Liability Insurance can help in protecting your personal investments, and offers protection for any legal and financial obligations caused by claims because of the alleged inability to act adequately. Fiduciary Liability Insurance isn't compulsory according to the Employment Retirement Security Act, however all companies that extends any kind of employee benefits plans must have this insurance coverage which is readily accessible.
That is why Fidelity Bond is needed in bad situations.
When unscrupulous trustees or administrators have financially harmed worker benefits plans, the bonds can be used, to benefit everyone including the beneficiaries. The bonding insurance won't shield the administrators themselves from any liability claims and is entirely separated from your fiduciary liability insurance.
Employment Retirement Security Act demands that qualified retirement accounts use a fidelity bond for covering a minimum of ten percent of the overall plan assets value (estimated at the start of the annual plan), with a lowest bond qualification of $1,000 and a upper limit bond qualification of $500,000. The bond must be received from their underwriter, and the requirement isn't waived for any reasons whatsoever. Fidelity Bonds is purchased separately and should be included as the nonobligatory protection to a BOP (Business Owners Policy).