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Fidelity Bonds: Understanding the Different Types

Fidelity Bonds: Understanding the Different Types

Two of the things that are most important to any business are its reputation and its customers. These are the bedrock elements of success for almost any business, so it’s important to have the tools to create a trustworthy reputation and a great relationship with one’s customer base.

That’s why many businesses purchase fidelity bonds. These types of surety bonds protect a business’s customers or other parties from misconduct by a business’s employees. Fidelity bonds are common in industries, from janitorial services to pension management, and it’s important for anyone in an industry where fidelity bonds are common to be familiar with the relevant types of surety bonds. Fidelity bonds aren’t hard to understand once you know how the different types work. Below, we’ll talk about how these bonds work, as well as the many different types of fidelity bonds that are available to businesses today.

What Is a Fidelity Bond and How Can I Get One?

Fidelity bonds are a type of surety bond that protects against dishonesty or financial misconduct by employees. Acts that a fidelity bond protects against may include theft, larceny, embezzlement, forgery, or any number of other financial crimes. See our guide for more detailed clarification on the basics: What is a surety bond? Before you apply for a surety bond quote, however, make sure to understand the different types of fidelity bonds available to businesses today.

Type of businesses that often need business service bonds include: cleaning/janitorial services, home health care services, landscape services, swimming pool services, pest control services, locksmith services, and moving services.

Business Service Bond

Business service bonds are the most common type of fidelity bonds. These bonds, also called business bonds or janitorial service bonds, guarantee honest and ethical conduct by employees who have access to a client’s home or business. Types of businesses that often need business service bonds include:

  • Cleaning services such as maids and janitors (aka Janitorial services)
  • Home health care services
  • Landscape services
  • Swimming pool services
  • Pest control services
  • Locksmith services
  • Moving services

Some states require specific bonds for moving services or contractor license bonds for locksmiths and landscape contractors. Be sure to check for bonds that are required by your state.

Unlike some other types of bonds, business service bonds aren’t required by any government agency. Often, however, a service business’s client will request that the business obtain a fidelity bond before accepting a contract. This helps create a strong start to the relationship between the business and its client by providing a financial guarantee of employee conduct.

Whether or not a business service bond is required, obtaining one will help build a trusting relationship with clients. For businesses with 25 employees or fewer and a bond amount under $250,000, business service bonds are available from Surety Bonds Direct as an instant purchase with no credit check.

Employee Theft and Dishonesty Bonds

An employee theft bond protects a business from theft or misconduct by its employees. These bonds are especially important for small businesses, which can be financially devastated by the actions of a single dishonest employee.

Employee theft and dishonesty bonds work a little differently from most other types of surety bonds. These bonds are more like a traditional insurance policy, in that the business pays the surety to cover its losses in case an employee commits a crime against the business, rather than covering a customer’s losses as a business service bond does.

Employee theft and dishonesty bonds are available with a variety of different bond amounts. Premiums vary according to the number of employees, state the business is located in, and other factors.

Fidelity bonds are a type of surety bond that protects agains dishonesty or financial misconduct by employees.

ERISA Bonds

Finally, what is an ERISA bond? ERISA surety bonds are fidelity bonds required for employees who have fiduciary duties on certain types of pension and profit-sharing plans. These bonds get their name from the Employee Retirement Income Security Act (ERISA), the 1974 federal law that established the requirement. An ERISA bond protects plan beneficiaries from theft or other malfeasance committed by plan administrators.

Fiduciary employees whose duties include any or all of the following must be covered by an ERISA bond:

  • Physically handling plan assets such as cash, checks, or bond certificates
  • Transferring or disbursing plan funds
  • Signing checks or creating other negotiable instruments
  • Supervising other employees who perform any of these duties

ERISA bonds must cover at least 10 percent of the balance of plan funds that the employee administers. For coverage amounts under $500,000, ERISA bonds are available as an instant purchase without a credit check.

The easiest and fastest way to get a fidelity bond is through Surety Bonds Direct. We’re a licensed bond broker in all 50 states, and our wide network of highly-rated sureties helps us keep premiums low by cutting out tangled networks of middleman brokers. Businesses can get started with a free online surety bond quote today, or call our bond experts at 1-800-608-9950.


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