A dishonesty bond is a type of fidelity bond that can protect your company from the dishonest acts of your employees. No employer wants to think that their employees are dishonest, but it does sometimes happen and without some form of protection, the consequences of an employee’s dishonest actions can severely impact a small business.

What a Dishonesty Bond Does

An employee dishonesty bond protects your business against the fraudulent actions of employees, such as theft, burglary, forgery, fraudulent use of cash, credit cards or computers, and money order fraud. If a bonded employee causes financial damage to your company through a covered dishonest act, the bond acts as an insurance policy that will reimburse you for damages. The amount of the bond you purchased is the maximum amount you can collect on your claim.

When a Dishonesty Bond is Useful

Most employees who are bonded are employees who directly handle cash or other finances for the business. This is because the bond provides protection for losses due to employee theft. In addition to protecting your company from theft, bonding your employees can provide protection for customers, because it helps ensure that should an employee steal a customer’s money, there will be funds available to reimburse the customer for their loss.

Why Bonding is Important for Small Businesses

Business insurance for theft of company property usually does not cover theft by employees. Small businesses may not have the cash reserves on hand to be able to recover from large losses due to employee theft or fraud. Dishonesty bonds can provide a safety net that ensures that small businesses are not forced into bankruptcy due to dishonest acts committed by employees.

Without the protection provided by bonding, the only recourse for a small business owner may be to sue the employee for damages. Lawsuits cost money, take time to resolve and there is no guarantee of recovery. Even if you win your case, the employee may not have sufficient assets to reimburse you for your losses.

Additionally, the protection provided to customers should they suffer losses at the hands of your employees may shield you from substantial lawsuits. It also provides your customers with added peace of mind that their assets are safe in your company’s hands.

While no business likes to think that its own employees may commit dishonest acts, it is critical for small businesses to protect themselves and their customers from the possibility. Employee dishonesty bonds can provide that needed protection.