Starting and running a business requires many decisions. For example, you have to determine your market, your product or service and your location. You need to figure out if you should outsource any part of your production or administration. Then, you have to work out your human resources, which will affect your insurance requirements. Statistics suggest that 75% of employees have stolen at least one time from their employers, and these thefts cost businesses $50 billion per year. Therefore, you will need to determine whether to purchase an employee dishonesty bond.
Dishonesty Bond Defined
If your employees act in a dishonest way, your business can be damaged financially. Dishonesty bonds, a type of fidelity bond, protect your company in the case of fraud, theft and embezzlement. Although they are not a legal requirement, these insurance policies may save your business. However, these policies do not protect your clients if your employees steal from them.
Bond Costs
These bonds are not expensive, but they are based on how many people your company employs as well as your preferred deductible and desired coverage, target market, industry and annual income. Although many policies start at just $100, you may pay up to $400 for $100,000 of coverage.
At-Risk Businesses
Some businesses are more at risk of employee dishonesty claims than others. For example, brokerages, in-home service providers, food and beverage companies, pharmacies and consumer electronics companies have high theft rates, so these companies should consider purchasing dishonesty bonds.
How They Work
Because these bonds are insurance policies, they have both a deductible and coverage limit. If your employee steals from you, you need to file a claim with the company you secured the bond from. Actually, any act that causes you to lose money and is punishable by law can result in a claim. However, both prosecution and conviction are required for the insurance company to recognize the claim as legitimate. In addition, the person who committed the crime needs to be a direct employee who receives a salary or wage from the employer. Therefore, if you employ independent contractors, you cannot make a claim if they damage your company.
Coverage Limits
Some acts are not covered by these policies. For example, if your employee steals a piece of equipment, causing a loss in income, the lost income is not covered. If you pursue legal action against the employee, your legal fees are also not covered.
If you are in a high-risk industry, consider investigating the benefits you may receive by purchasing a dishonesty bond.
