Bonding Employees

April 13, 2006

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Even if you have an internal auditing system that makes embezzlement difficult, the danger of collusion still exists. Consequently, some companies protect themselves from employee dishonesty by bonding their employees.

Bonding, the process by which an employer can be indemnified for the loss of money or other property sustained through dishonest acts of a "bonded" employee, can cover many types of acts including larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, willful misapplication, or other fraudulent or dishonest acts committed by an employee, alone or in collusion with others.

There are several types of fidelity bonds. Discuss each with your agent to determine whether damages from negligence are covered. Basically, your business has several options at its disposal, which are:

individual — covers one employee (usually purchased by small concerns or family-operated businesses with only one employee)
name schedule or position schedule — covers either the employees or positions specified
blanket fidelity — covers all employees
commercial, blanket, and blanket position — provides multiple protection (comprehensive dishonesty, disappearance, and destruction coverage, or a blanket crime policy)

There is great choice in features and coverage as well as cost differences in bonding coverage.