Fidelity Bonds

In our previous post, the Surety Department/Practice of Stone Creek Insurance Agency described what a bond was, and defined certain terms in the bond. In this update, we are going to discuss the type of bond. Please remember, in theory, a Surety Company does not have losses. Why? The Surety Company will always be made whole through the indemnity agreement, which the Principal signs. Most property and casualty agents have come across three types/classes of bonds. Those bonds are fidelity, contract, and commercial. Each type/class has a unique set of underwriting criteria. However, they are similar in that each has a Principal, Obligee, and Surety Company. We will discuss fidelity first.

Fidelity Bonds – Fidelity

Fidelity is also known as employee dishonesty bond. It is used to cover the theft of money, securities and other fungible property by employees. The Principal in the Fidelity Bond is the employee. The Obligee in the Fidelity Bond is the Employer. Of course the Surety is the insurance company. This bond is written fairly easily for main street businesses, and the questionnaire’s main focus is to confirm a separation of duties of employees.
Another easily written fidelity bond for certain businesses is the third-party liability or business services bond. The types of businesses that usually get this bond are maid services, rug cleaning, exterminators, etc. The important clause in this bond is conviction clause’. Simply stated no conviction of the employee; no claim to be paid out by Surety Company.
With that said, the fidelity bond for Banks, Credit Unions, Homeowners Association, etc., is much more difficult to obtain, and is written with larger deductibles. The underwriting process for these bonds is more in-depth with a questionnaire to be completed along with CPA prepared statements. Why the in-depth underwriting? These entities are handling money.

Fidelity Bonds – Let’s Talk

The best way to find a Surety Company that understands your particular business is to work with a Broker. At Stone Creek Insurance, we have access to many companies that understand each particular business. It is easy to get an no obligation review of your Fidelity Bond by speaking with an Agent at 925-297-4202.