There is a hidden risk facing small businesses across the country that often goes unnoticed until it suddenly rips through a firm’s finances: employee theft. It’s a crime that is costing U.S. businesses $50 billion annually, with 7% of annual revenues lost to theft or fraud according to Statistic Brain.
Studies found that U.S. businesses affected by employee theft lost an average of $1.13 million in 2016. Small and midsize businesses were hit disproportionately, representing 68 percent of the cases. Their median loss in 2016 was $289,864.
Despite the alarming levels of embezzlement taking place, it isn’t top of mind for many small-business owners.
When one hears the word “Bonds” it brings to mind an investment. But there are other types of bonds that have nothing to do with investing; they relate to business operations and function similarly to insurance.
Surety Bonds are like insurance. They back up a promise to do something; if the promise is breached, the bond pays off to complete the promise.
One common Surety Bond type is a Fidelity Bond (or Crime Bond). Fidelity bonds provide insurance against loss from employee misconduct, such as theft or embezzlement, which is not otherwise covered by a company’s regular insurance coverage. A bond can provide blanket coverage for the actions of all employees or can be tailored to cover one or more specific employees.
When safeguards like thorough employee screening and careful supervision aren’t enough, fidelity bond coverage to protect against employee theft is recommended. If one or more of your employees are entrusted to handle cash or other valuable assets, a Fidelity Bond can protect your business.
Coverage can include:
- Employee theft – Stealing merchandise.
- Forgery or Alteration – Checks, gift cards etc.
- Theft of Money and Securities – Registers etc.
- Robbery of safe, burglary of other property, stones, bullion, etc.
- Computer fraud, funds transfer, diverting funds to personal accounts.
- Money orders and counterfeit money.
- Theft from third parties, on loan, deliveries, on customer’s premises.
The cost of Fidelity Bonds: There is no fixed rate for bonds. There are many factors that impact cost, such as the extent of coverage, whether there is a deductible (if allowed), and the surety company that issues the bond. As a rule of thumb, a fidelity bond can cost about ½% to 1% of the coverage obtained.
Surety and fidelity bonds are a risk management tool, it is helpful to discuss your business requirements with an experienced, trusted agent like BFBond/Bernard Fleischer & Sons Inc. We can advise you what coverage is best for your business when traditional insurance doesn’t provide the protection you want or require.