Often referred to as a fidelity bond, an Employee Dishonesty Bond is a type of insurance coverage. It protects a business, a business owner, a not for profit company, and even a government entity from financial loss due to theft by an employee or volunteer. Proof of loss will have to be provided to collect, however, a conviction of the guilty party is not required under this policy. The insured is the employer, business or government entity, etc.
Common Insuring Agreements
There are 8 common insuring agreements in the Employee Dishonesty Bond. There are:
Employee Theft – Just what it says. If an employee steals from the company, this provides insurance coverage for that.
Employee Theft – Client Premises – This optional coverage covers theft of property of clients by employees of the insured. The insured must have a contractual relationship with the client and the property must be under the “care, custody and control” of the insured’s employees at the time of the loss.
Computer & Funds Transfer Fraud – If the insured’s computer is hacked and suffers a direct financial loss as a result of tangible property, or a fraudulent transfer of funds by a third party occurred, this agreement would provide coverage. While part of the employee dishonesty bond, if an employee caused a loss related to computer fraud, it would fall under the first insuring agreement.
Inside the premises – If the insured suffered a loss due to a robbery by a non-employee at its place of business, this agreement provides coverage.
Outside the premises – Provides the same coverage as the previous agreement but the loss happened outside the physical premises of the insured. For instance, an employee on the way to the bank with a deposit is robbed.
Depositors Forgery or Alteration – Provides coverage from forged or altered checks by a third party (not an employee). If the forgery or alteration was done by an employee, it would fall under the first agreement, employee theft.
Credit or Debit Card Forgery – If a credit or debit card is copied, again by a non-employee, and the company suffers a financial loss as a result, this agreement provides coverage.
Money Orders and Counterfeit Currency – Provides protection from receipt of counterfeit money or money orders.
What are some underwriting considerations of an Employee Dishonesty Bond?
The underwriters will want to see that there are some financial controls in place prior to offering a quote. For instance, the application will ask:
” Are employees who reconcile monthly bank statements also handling bank deposits?”
If the answer to this question is “no”, it may be difficult to obtain a quote. The underwriters want to see a separation of duties when it comes to handling money. In this case, if the same employee that makes deposits reconciles the bank statements, it is easy to defer deposits to an unauthorized account. There are several other underwriting questions on the employee dishonesty bond application of this nature.
To obtain an application please call Surety1 at (877)654-2327 and an agent will be happy to assist you.