All businesses and professionals should get insurance cover for any potential losses that may arise from criminal activity. In this post we will outline the differences between two key forms of cover: crime insurance, and fidelity bonds.
What are Fidelity Bonds?
Fidelity bonds may also be referred to as employee dishonesty insurance. Fidelity bonds can cover your business for any losses that may arise as a result of fraudulent or dishonest acts committed by your employees.
For example, if an employee embezzles or steals money from the business, such as through credit fraud or forged cheques, your fidelity bonds can cover your financial losses up to your pre-agreed cover limit.
What is Crime Insurance?
While fidelity bonds offer specific cover for employee dishonesty, crime insurance can provide much broader cover. Like fidelity bonds, crime insurance can cover your business for losses arising from employee fraud. However, a crime insurance policy can provide additional cover for losses that result from third party criminal activity, including robberies and forgeries.
Crime insurance can also provide cover for losses resulting from cyber breaches and data theft – though a dedicated cyber insurance policy can offer the broadest cover here.
The Key Differences Between Fidelity Bonds and Crime Insurance
- Fidelity bonds offer narrow, specific cover for employee dishonesty. Crime insurance provides much broader cover for losses stemming from a wide variety of criminal activity – including criminal acts committed by third parties.
- Fidelity bonds may not cover all losses that arise from employee activity. The insurance may only extend to specified acts of employee dishonesty. This means you will not be covered for losses stemming from poor sales performance, or from business risks that do not pay off.
- In certain regulated sectors, there may be a legal requirement to put fidelity bonds cover in place, as it can provide such a strong deterrent against insider fraud.
- There are often strict reporting requirements and timelines for claims made on fidelity bonds. Crime insurance policies, though, can be a lot more flexible. You may, for example, be able to choose between claims-made or occurrence-based policies, which can result in a more streamlined claims processed.
To sum up, crime insurance policies may include the employee dishonesty cover you would get from fidelity bonds, but fidelity bonds will not provide the broad cover you might get from a crime insurance policy.
Crime Insurance or Fidelity Bonds – Which is Right For My Business?
Some people may use the terms “fidelity bonds” and “crime insurance” interchangeably. But as we have seen, these are two different insurance products offering different levels of cover for your business.
So, which form of cover is right for your business?
You could tailor your crime insurance policy to include some cover for employee dishonesty. However, fidelity bonds can be particularly useful for businesses that offer certain financial and professional services.
If your business handles large amounts of cash, or if you deal with sensitive financial information, you may face an increased risk of insider fraud. In this case, you may need to get dedicated employee dishonesty cover in addition to your broad crime insurance cover.
At James Hallam, We Can Help Your Business Get The Cover You Need
James Hallam is an independent Lloyd’s broker with a dedicated team of experienced insurance professionals who care about protecting your business.
We will take the time to get to know you and your business, so that we can advise you on your specific business insurance requirements. can advise you on your business insurance and regulatory requirements. We can then help you get the cover you need for the crime risks your business is facing, whether this means a broad crime insurance policy, or a more specific fidelity bonds policy.
Learn more about our professional risks insurance services.