What is a Commercial Crime Bond?

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: 

  • 1st Party Coverage: Provides protection should an employee steal from it’s employer (the insured), and;
  • 3rd Party Coverage: Provides protection should an employee steal from the customer’s of the insured.

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:

  • Employee Theft (1st Party): Covers loss resulting from theft of the insured’s property by an employee .
  • Employee Theft - Clients Property/Premises (3rd Party): Covers loss resulting from theft of the insured’s client property by an employee.
  • Forgery or Alteration: Covers loss resulting from the forgery or alteration of checks, or other similar promises to pay drawn upon the Insured.
  • Theft of Money and Securities and Other Property - Inside the Premises: Covers money, securities, and other property holding intrinsic value inside the premises or while on deposit at a bank or financial institution against theft, disappearance, or destruction.
  • Theft of Money and Securities and Other Property - Outside the Premises:  Covers money, securities, and other property holding intrinsic value against theft, disappearance, or destruction while outside the premises and in the care and custody of either a messenger or an armored vehicle company.
  • Computer and Funds Transfer Fraud: Covers loss resulting from the use of any computer to fraudulently transfer money or other valuables and from loss resulting from the communication of fraudulent transfer instructions to a financial institution.
  • Money Orders and Counterfeit Money: Covers loss resulting from the acceptance of counterfeit paper currency or money orders that are not paid when presented.

How much does a Commercial Crime bond cost?

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.

Is a credit check required for Commercial Crime bonds?

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.

Who needs a 3rd Party Commercial Crime bond?

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.

What is a Blanket Commercial Crime 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.