What are Fidelity Bonds: Types and Benefits


When you’re running a business, there are many things to worry about, from making sure your products and services are top-notch to keeping track of your finances to protecting your company against theft or fraud.

One way to help protect your business is by purchasing a fidelity bond. But what is a fidelity bond? This article will explain what fidelity bonds are, the different types available, and the benefits of having one.

What Is It?

This is a type of insurance that companies purchase to protect themselves against employees who commit theft, forgery, fraud, larceny, or embezzlement. They are also known as surety bonds or dishonesty bonds.

Here’s how these bonds work:

If an employee commits one of the acts covered by this, the company can claim the bond to recover any losses. The insurance firm that issued the bond will then investigate the claim and if it finds that the employee did indeed commit fraud or another covered act, will reimburse the company for its losses.

They are not the same as errors and omissions insurance, protecting companies from losses due to employees’ mistakes or negligence.


Here are some types:

1) Financial Institution

These are also called bank bonds, and they protect the customers of a financial institution from losses from employees’ fraudulent activities. These help ensure that customers’ money is safe if an employee steals it.

Some examples of financial institution fidelity bonds are:

– Bank teller

– Vault cashier

– Bookkeeper

– Loan officer

– Wire transfer officer

Bank teller bonds are the most common type.

Vault cashier bonds are for employees who have access to the bank’s vault. It protects the bank from losses if the employee steals money from the vault.

Bookkeeper bonds protect the bank from losses if an employee steals money by making false entries in the books.


ERISA is the Employee Retirement Income Security Act. They protect employee retirement plans from losses due to fraud or theft by plan fiduciaries.

They are required for all fiduciaries of employee retirement plans with more than 100 participants.

Fiduciaries include anyone who handles plan assets, such as investment managers, financial advisors, and administrators.

The Department of Labor requires that ERISA bonds have a minimum coverage of $500,000 per fiduciary.

They can be purchased from insurance companies or through surety companies.

3) Court

They are a type that some state courts require for a business to operate within their jurisdiction. These are also known as judicial bonds. The purpose of this is to protect the court from any losses due to the business’ activities.

4) License and Permit

This is required by some state and local governments to obtain a business license. This aims to protect the government from any losses due to the business’ activities.

Final Thoughts

Contractors usually require performance surety bonds to ensure the job is completed as specified. If the contractor fails to perform well, the owner can file a claim against the bond and receive compensation for any losses incurred up to the bond’s total value.