Fidelity Insurance Policy for your Business
What is Fidelity Insurance?
Fidelity Insurance, which is also called a Fidelity Bond Insurance or Fidelity Guarantee insurance, is a type of insurance for your businesses to protect it in case their employees end up causing any losses due to things like dishonesty, theft or fraud. Even if such employees are a tiny minority, their acts can lead to a huge loss for your business.
Let’s look at an example, if you have a window repair business, and a worker was sent to a customer’s home but ends up stealing some of their jewelry, your company might be liable for this employee’s actions. Or, if after an employee leaves, you find out that they were using company credit cards to buy clothes online.
Having a fidelity insurance can protect you and your business against such circumstances, however rare they may be.
What does a Fidelity Insurance cover?
Getting a Fidelity Insurance, will protect your business in case of…
Theft
This means that the policy will cover your business against any theft committed by employees of any of your business’s assets. For example, if a worker at a construction site steals some tools and then sells them online.
Embezzlement
The policy will cover your business in case some employee uses company funds for a different purpose than it was meant for. For example, if someone creates a fake bill or receipt for some activity, but uses the money paid for personal expenses.
Forgery
This insurance will also cover you if an employee has committed acts of forgery or alteration. For example, if someone who works for you forges your signature on a check or document.
Theft from Customers/Clients
You will be covered if any of your employees are found to have stolen money or property from a customer or client. For example, if an employee of a property management company collects extra rent from tenants, but pockets the extra cash.
What’s not covered?
Since we believe in transparency, here are some situations that won’t be covered.
- If the financial loss arises outside Papua New Guineaa.
- More than one claim made against a particular employee after you have discovered their previous fraud or dishonesty.
- Consequential or indirect losses or damages (like reduced profits, loss of some opportunity, or an interruption to your business).
- Any losses discovered more than 12 months after the termination of the employee.
- In cases where you (the employer) were not observing the agreed-upon system of checks and precautions.
- Any losses due to things like stock-taking shortages, trading losses, that were not caused by fraud or dishonesty.
What are the advantages of having a Fidelity Insurance?
You’ll be financially protected against any theft of funds and other dishonest acts committed by your employees.
It protects your company from a few bad apples who might affect the entire business and even other employees.
In case you face the loss of a customer’s property due to an employee’s dishonesty, your business will be covered.
Even if you end up losing any of your business assets such as property, or stock certificates, you’ll be covered.
You can customize your policy’s coverage based on the specific needs of your business.
What are the types of Fidelity Insurance?
Since getting fidelity insurance is a great way to manage the risk to your business, you should keep a lookout for the type of plan that will work best for you and your business. Generally, there are four types of fidelity insurance plans:
- Individual Policies – this type of plan will cover any losses due to the fraud or dishonesty of an individual employee.
- Collective Policies – under this policy, you will be covered against any fraudulent acts by a group of employees (and you can choose the amount of the guarantee based on the employee’s responsibilities and positions).
- Floater Policies – this is similar to the collective policy as it also covers a group of employees, but here a single guarantee amount is applied across the group
- Blanket Policies – these types of plans will cover all the employees of the organization.
- First-Party Coverage – this kind of plan will cover any losses to your own business due to Losses any wrongful activities by your employees.
- Third-Party Coverage – this covers any claims made by the customers or clients of your company against any dishonest acts by your business’ employees.
Types of Businesses that need Fidelity Insurance
Any organization that employs people can never ensure that all of them will be completely honest all the time. That’s why getting a fidelity insurance might be a good idea for your business, especially if:
It deals with a lot of petty cash.
This can include restaurants and cafes as well as many stores or theatres.
Your business has a lot of merchandise or products.
Retail businesses like shops and boutiques are a few examples.
You deal with a lot of vendors, clients, and customers.
For example event planners, marketing firms or PR agencies.
It collects any personal information from customers.
Like advertisers or even online stores.
How much will a Fidelity Insurance Cost?
Your Fidelity Insurance premium is usually about 0.5- 2% of the total coverage or sum insured of the policy. There are a lot of other relevant factors that go into calculating fidelity premiums, such as:
- The number of employees.
- The specific type of work they perform and their responsibilities.
- The maximum amount of funds or assets handled by the employees.
- The safety and security measures your business takes against cases of fraud.
- The past claims made against your business’s employees.
How to choose the right Fidelity Insurance policy?
- Choose the right type of plan – Consider the nature of your business and the number of employees and their responsibilities and pick the type of plan that will work best for you and your business.
- Get the right coverage – Make sure that the insurance policy is and see if it gives you the best coverage for all your employees and any risks to your business.
- Compare different policies – Look at many different fidelity insurance policies and find the one that will work best for your business. Remember, sometimes a policy with the lowest premium might not be the best option because it might not give you the right coverage, so compare the features and premiums of different policies to find one at an affordable price.
- Pick the right sum insured – When you’re choosing a fidelity policy, try to find one that allows you to customize your sum insured based on the nature of your business and the number and positions of your employees.
Things to remember
- Make sure your business has lots of safety and security measures. For any business that has a lot of tangible assets, it can be very important that you do everything you can to protect them, like locked doors, an on-site safe, and security cameras or security guards.
- Always conduct background checks on your employees. Before hiring any employees, especially those with a greater number of responsibilities and accesses make sure to check that they don’t have a criminal past.
- Monitor your receipts, sales and inventory regularly. Check all receipts against sales amounts, and money deposited regularly so that you can flag and discrepancies when it comes to missing or damages money or property early on.
- Check what is and is not covered under your fidelity insurance. For example, some standard policies may not cover data theft or computer hacking and fraud, so, read through the terms and conditions and you won’t be surprised by anything later.
- Evaluate all the factors together. Consider the risks posed as well as the number of employees as well as the sum insured and the premium to find the policy that gives you the best value.
As Insurance is a complex subject, please talk to us now for professional advice and to make sure your level of coverage is appropriate, adequate, and sufficient to your requirements.
The List of Risks or the range of insurances available is not exhaustive, if there are any particular risks that are possibly unique to your type of business and/or for any specific or special requirements, please seek our assistance and guidance.