Many bonds that businesses can buy are designed primarily to protect third parties, such as contractor bonds and performance bonds. An employee dishonesty bond is a type of surety bond that protects the business in case of employee dishonesty. This bond is not required by law or other entities the business may work with. Instead, it is an optional bond that most businesses use to protect their assets. 

While you want to believe that you can trust anyone you hire, it is impossible to predict everything—especially the actions of others. Having an employee dishonesty bond can protect your business from the unexpected.

What Does an Employee Dishonesty Bond Cover? 

If an employee is caught committing fraud or embezzling money, an employee dishonesty bond can reimburse the business for money lost. 

The Difference Between an Employee Dishonesty Bond and a Business Service Bond 

An employee dishonesty bond and a business service bond are similar in that they both cover against employee theft. There is a huge difference between the two, however. Where a dishonesty bond protects the business in case an employee steals from the business, a business service bond steps in if an employee steals from a customer. If an employee commits a crime against a customer, this bond will help pay for the damages and possible lawsuit. 

For example, say you send an employee to work on a customer’s private home project. While working, they steal some jewelry and a bit of cash. The customer realizes what happened only after the employee leaves and calls the police, who then investigate your employee and your business. A business service bond will help pay for the jewelry and cash replacements and any legal fees your business may face should the victim decide to sue. 

The Difference Between an Employee Dishonesty Bond and Crime Insurance 

While fidelity bonds and crime insurance are extremely similar, there are certain minute differences. An employee dishonesty bond is more specific (geared towards embezzlement, fraud and the like) whereas crime insurance is more general. Most actions an employee commits that loses the business money could be covered under crime insurance, such as forgery of contracts and business checks, destruction or damage of money or property, computer hacking, social engineering fraud, receiving counterfeit money and more. Crime insurance also varies more widely in price. On its own, a business could pay anywhere between $240 and $4,000 depending on the size of the business and other factors. 

Another obvious difference is that an employee dishonesty bond must be purchased through a surety. Some insurance providers also operate as sureties, but there are also standalone sureties that offer a range of surety bonds for businesses across industries, including different types of dishonesty bonds. 

If you aren’t sure about which path to take when it comes to protecting your business against employee theft, be sure to speak with your insurance agent. They should be able to help you decide whether insurance or a fidelity bond is the right decision to protect your business. 

How Much is an Employee Dishonesty Bond? 

Employee dishonesty bonds are relatively inexpensive, especially compared to other types of bonds. The cost depends on a variety of factors, but a business could pay between $300 and $400 a year for a $100,000 policy. For lower coverage and a low risk industry, you could pay as little as $100 a year. 

Who Does Employee Dishonesty Cover? 

An employee dishonesty bond is designed to cover any employee under the business. Business owners may want additional coverage limits for specific employees who deal with the company’s assets, such as managers and directors. If your business expands and hires more employees, be sure to notify your insurer so that your policy can reflect your business’ changing insurance needs. 

Along with purchasing an employee dishonesty bond, take the proper measures to prevent employee theft. This includes conducting thorough background checks on possible aspects, keeping important assets locked away even electronically from those who do not need access, and being careful about who has access to certain funds. There should be a way to track funds, including cash that passes between hands. Inventory should be checked at least every day. Also make sure your business’ computers are safeguarded against possible hackers and cyber-attacks.