Usually, most companies follow strict screening procedures and a detailed interviewing process to find perfect candidates for open positions. Even though there is an inherent level of trust placed in both the procedure and the individuals chosen by it, companies still need to protect themselves in case of a crime committed by the employees. In these cases, they use a specific type of insurance called a loyalty bond, which can protect both clients and the company itself.
What Is a Fidelity Bond?
When employees are caught committing fraud, theft or another criminal offense that impacts the company, they must be immediately disciplined and the employer must take the correct measures for this situation. A precautionary action an employer can take is obtain a fidelity bond. This type of bond is an insurance plan that covers against an employee’s misdeeds if they hurt the company. There are two types of fidelity bond commonly used throughout numerous industries: employee dishonesty and business service bonds.
What Is an Employee Dishonesty Bond?
An employee dishonesty bond protects the business or company from any criminal act committed by an employee, such as fraud, embezzlement and theft. This plan specifically protects the business owner and the business itself from any potential loss and damages. The conviction of the offender is not necessary, but the beneficiary must provide evidence of loss.
What Is a Business Service Bond?
On the other hand, a business service bond aims to protect the company’s clients from the actions of the employee. In particular, businesses that provide services in a client’s property, such as landscaping, cleaning and other contracting services use this bond. It covers the client’s financial loss if the employee commits theft within the property.
Fidelity bonds are important to maintain the health of both the business entity and the clients. Obtaining both kinds of fidelity bonds covers the potential victims of employee fraud and establishes the business’s integrity.