How to Get Fidelity Bonded: Costs, Requirements & 5 Easy Steps

A fidelity bond may be required for jobs involving money, property, or other valuable assets.

Employers typically arrange the coverage, while some job seekers who face bonding barriers may qualify for assistance through the Federal Bonding Program.

What are Fidelity Bonds?

Fidelity bonds are essentially a type of casualty insurance that indemnifies a company for losses caused by

• Intentional dishonesty
• Fraud, or
• Theft committed by specified individuals, typically its own employees or, with a third-party bond, its contractors.

Despite the name, fidelity bonds are not bonds in the traditional surety sense but are insurance policies.

Types of Fidelity Bonds

Fidelity bonds are typically used whenever a business faces risk from insiders.

In addition to ERISA, other contexts include government contracting, financial services, nonprofits, or any client contract that mandates bonding.

But even outside formal requirements, fidelity bonds are seen as prudent risk management for businesses handling cash, securities, or valuables.

What Information Do You Need to Get Bonded?

How to Get a Fidelity Bond: Step-by-Step

Businesses and individuals typically obtain fidelity bonds through insurance companies or authorized brokers/agents.

Here’s how to get started.

Step 1. Determine How Much Fidelity Bond Coverage You Need

First, figure out why you need the bond.

Are you trying to satisfy an ERISA requirement? Is a client requiring your business to carry a bond? Or do you simply want protection against employee dishonesty?

Start with these questions:

• How many people need coverage?
• What money, property, or assets can they access?
• Does a contract, client, lender, or law require bonding?
• Do you need blanket coverage for employees or scheduled coverage for specific individuals?
• Is the bond covering an ERISA retirement or benefit plan?

Step 2. Find an Insurance Company or Bonding Provider

Once you know roughly what you need, it’s time to find a provider.

A fidelity bond may be available through an insurance company, licensed insurance agent, or bonding specialist that offers fidelity or commercial crime coverage.

Don’t compare providers based only on price.

A cheaper policy isn’t necessarily better if it excludes the type of loss you’re actually trying to protect against.

When comparing policies, look at:

• Coverage limits
• Who is covered
• What acts are covered
• Exclusions
• Deductibles
• Premiums
• Policy period
• Renewal requirements

Also, here’s another important distinction.

ERISA Plans Have Additional Requirements

If the bond is for an ERISA plan, you generally need to use an eligible surety or reinsurer that appears on the U.S. Department of the Treasury’s approved surety list.

So don’t assume that any commercial fidelity policy automatically satisfies an ERISA bonding requirement.

Step 3. Complete the Fidelity Bond Application

Once you’ve chosen a provider, you’ll need to complete an application.

You may be asked for information such as:

• Business name and industry
• Number of employees
• Employee duties and responsibilities
• Amount of money or property handled
• Requested coverage limit
• Previous losses or claims
• Internal financial controls
• Security procedures
• Financial information, depending on the size and type of coverage

If an employee handles substantially more money than you disclose, or the application doesn’t accurately describe the employee’s responsibilities, that can create problems later.

Step 4. Complete Underwriting and Review the Terms

Now the insurer or surety reviews your application.

The provider determines whether it can offer the requested coverage and, if so, what the premium will be.

For straightforward applications, this may be relatively simple.

Larger coverage amounts, unusual risks, previous losses, or specialized industries can lead to additional questions.

You may be asked to provide more information before the policy or bond is issued.

Step 5. Pay the Premium and Receive the Bond

Once the application is approved and the terms are finalized, you’ll pay the required premium.

The insurer or surety then issues the bond or policy.

At that point, don’t just file it away and forget about it.

Keep the documentation with your business or plan records.

You should also review the coverage periodically.

Why?

Because the underlying risk can change.

• Maybe you hired more employees.
• Maybe employees now handle substantially more money.
• Maybe the value of the plan’s assets increased.
• Or perhaps a new client or contract requires a different coverage limit.

How Long Does It Take to Get Bonded?

For straightforward cases, fidelity bonds can often be issued very quickly.

• Some brokers tout the fastest issuance via online apps.
• Small bonds (e.g., under $100K) with simple applications may be bound within a few business days.

Fidelity Bonds vs. Surety Bonds

While both are called bonds, fidelity and surety bonds serve very different purposes.

In a fidelity bond, the insured company is the beneficiary: the policy insures the company’s own losses from internal fraud.

By contrast, a surety bond is a three-party guarantee where a surety company ensures that a principal will perform an obligation to an obligee.

References:

• https://www.fidelity.com/fixed-income-bonds/overview
• https://www.nationwide.com/business/solutions-center/finances/fidelity-bond