What is a Fidelity Bond?

Protecting business owners from employee dishonesty.

Employee Dishonesty Insurance, often broadly referred to as a “fidelity bond,” is a type of business insurance that offers an employer protection against financial losses that are caused by its employees’ dishonest misconduct.

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Fidelity Bonds

Although fidelity bonds were originally written as three-party surety bonds guaranteeing the honesty of an employee, today’s fidelity bonds are two party insurance policies. In addition to being referred to as a fidelity bond, Employee Dishonesty Insurance is sometimes also referred to as:

Financial Institution Bond
Commercial Crime Policy
Employee Dishonesty Bond
Crime Insurance Coverage

Why Do You Need Fidelity Bond?

Each year, businesses lose millions of dollars to employee theft, with some cases resulting in bankruptcy. Every business with employees, regardless of size or industry, should purchase a fidelity bond to protect it from fraud. According to the U.S. Chamber of Commerce:

Three out of four employees admit to stealing from their employers at least once.
One of every three business failures is the direct result of employee theft.
Employee dishonesty losses incurred by American business total more than $50 billion annually.

Surety & Fidelity 101

What Can Businesses do to Protect Themselves?

First and foremost, all businesses should put into place policies and procedures designed to help protect the company from financial loss caused by dishonest employees. Examples of these preventive measures include:

Pre-hiring background checks of prospective employees
Countersignature requirements for checks
Reconciliation of bank accounts by someone other than the employee that handles deposits and withdrawals.
Internal audits/review of all financial records and inventory
Annual audits using an independent accountant
Employee Dishonesty Insurance (Fidelity Bond)

Despite a business’s best efforts at prevention, losses can still occur. Incorporating Employee Dishonesty Insurance (Fidelity Bonds) into the company’s risk management practices offers a substantial hedge against financial losses caused by employee theft. These policies are especially important for small businesses, which can be financially devastated by the actions of a single dishonest employee.

Examples of Fidelity Bonds:

Generally speaking, within the marketplace, there are two general types of fidelity insurance available today:

Financial institution bonds (offered to financial institutions such as banks, stockbrokers, insurance companies etc.)
Commercial crime insurance policies (offered to non-financial commercial entities)

Within each category there are different policy forms designed for specific types of institutions. These include:

Surety Protects

Learn how surety
bonds protect taxpayers,
save time,
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keep projects on track.

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U.S. Senate Unanimously Supports Surety Bonds and the Protections and Economic Value They Provide to Our Nation’s Critical Infrastructure Development

See Senators Capito, Carper and Van Hollen speak on the Senate floor about the importance of surety.

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The Surety & Fidelity Association of America Foundation Awards 15 Students With $5,000 Scholarship

SFAA Foundation announces 15 students selected as recipients of a $5,000 scholarship as part of the Surety and Fidelity Intern and Scholarship Program for 2022.

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News & Events

The Surety & Fidelity Association of America Foundation Awards 19 Students With $47,500 in Scholarships

October 18, 2023

The Surety & Fidelity Association of America Foundation (SFAA Foundation) announced today the 19 students selected as recipients of a $2,500 scholarship as part of the Surety and Fidelity Intern and Scholarship Program for 2023.

SFAA, NASBP and a Coalition of Partners Strongly Support Bill Providing Essential Protections on WIFIA Financed Projects

September 27, 2023

The Surety & Fidelity Association of America (SFAA), National Association of Surety Bond Producers (NASBP), and a coalition of industry partners commend Senator Mark Kelly (D-AZ) and Senator Kevin Cramer (R-ND) for the introduction of S.2928

SFAA Annual Meeting Highlights 2022 Accomplishments and Initiatives; Membership Elects Board

June 7, 2023

The Surety & Fidelity Association of America (SFAA), a nonprofit, nonpartisan trade association representing all segments of the surety and fidelity industry, held its annual meeting last week in Washington, D.C. with more than 185 members and guests attending.

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