Commercial crime bonds, also known as “Employee Theft” or “Employee Dishonesty” bonds are a subset of the broader category of fidelity bonds that provide protection to a business (the “insured”) for losses resulting from the fraudulent or dishonest acts committed by its employees.
Commercial crime bonds can be subdivided into 2 primary types based on the coverage desired:
Businesses can purchase policies that contain both 1st Party and 3rd Party coverage, along with a variety of other coverages called “insuring agreements”. The following insuring agreements are available in most commercial crime bonds:
Commercial Crime bonds costs vary widely and are determined by the coverages selected, the industry of the insured, number of employees, services offered by the insured, and controls in place to prevent losses.
For most commercial crime bonds, a personal credit check of the business owner is not required to purchase the bond. The surety company will review the insured’s business practices including the services offered, employment and hiring practices and controls in place to prevent losses. Larger bonds may require a review of a business financial statement.
Ultimately, the surety insurance company determines how it will underwrite and price a fidelity bond, and some companies may be more or less stringent than others.
3rd Party Commercial Crime bonds are most often needed for businesses that perform services on their customer’s premises. Janitorial services companies, handyman construction services and in-home medical providers are the most common business types that require a bond.
The term ‘blanket commercial crime bond’ or simply ‘blanket bond’ refers to the extent of the 3rd party coverage offered by the policy. Blanket bonds cover losses related to all of the insured’s clients.The alternative to a blanket bond, a client-specific fidelity bond, covers only customers specifically named in the policy. Client-specific commercial crime bonds are most often utilized when a business enters into a contract with a customer requiring fidelity coverage. Commercial Crime bonds issued on a blanket basis are typically more expensive than client-specific commercial crime bonds.