As a business owner or manager, you always try to hire the best people. Every now and then, however, someone may slip through the cracks by failing to disclose something, or have a drastic change-of-life circumstance. So. what happens if they commit a crime like fraud using business accounts or in the name of your company? You can try to sue them, but chances are they don’t have the means to repay in this circumstance. This is where an employee dishonesty bond can be a lifesaver.
What Does a Dishonesty Bond Do?
Thing of an employee dishonesty bond just like any other type of insurance policy. You, as the business owner, pay a monthly or annual freedom, and if the company must cover fraudulent charges made or caused by an employee, the policy will pay out the damages. Like other forms of insurance, the amount of coverage can vary, usually depending on how high your monthly premium is.
What Does It Cover?
An employee dishonesty bond covers the loss of money, property (including product inventory or equipment) caused by an employee with malicious intent; specifically geared to causing the business harm or using its funds improperly. It does not cover negligence, as that is another form of insurance altogether.
First Party vs. Third Party
An employee dishonesty bond can be either first-party or third-party. A first-party policy will protect your company from its own employee’s actions, while a third-party policy protects you from wrongful money-costing acts committed by a subcontractor. Most contractors are required to carry third-party bonds as well.
It is a good idea for businesses to insure themselves against many possible negative scenarios. Employee fraud is one that can easily be overlooked, but not being covered by a policy could cost a business a devastating amount of money under the right circumstances.