What a fidelity bond is and who needs one

A fidelity bond is an insurance policy that protects a business or organisation if an employee steals money or property. The bond reimburses the employer for the loss. You get one by contacting an insurance broker or agent, filling out an process about your business and employees, and paying a premium — usually annually.

You need a fidelity bond if you work in a field where employees handle cash, valuables, or sensitive assets. Common industries include retail, banking, security services, nonprofits, law firms, and accounting firms. Some employers require it as a condition of employment. Others carry it because their clients or regulators demand it.

The bond does not protect the employee — it protects the employer. If you are an employee wondering whether your workplace should have one, that is a question for your manager or HR department. If you are a business owner or manager deciding whether to buy one, this guide explains how.

Key Takeaways

  • You buy a fidelity bond through an insurance broker or agent, not directly from an insurance company in most cases.
  • The process asks about your business type, number of employees, annual payroll, and history of theft or dishonesty claims.
  • The insurance company investigates your business and may run background checks on employees before issuing the bond.
  • Annual premiums vary widely based on business size, industry, and risk — there is no standard rate.
  • The bond covers losses from employee theft but has limits on how much it will pay out per incident and per year.

Finding an insurance broker or agent

You cannot buy a fidelity bond directly from most insurance companies. Instead, you work with a licensed insurance broker or agent who represents one or more insurers. A broker shops around on your behalf; an agent typically represents one company. Either way, they handle the paperwork and guide you through the process.

Start by asking your current business insurance provider — your general liability or property insurance agent — whether they offer fidelity bonds or can refer you to someone who does. Many agents handle multiple types of business insurance and can add a fidelity bond to your existing policy or place it with a partner company.

If you do not have an existing agent, search online for "fidelity bond insurance" plus your state or city, or ask your industry association whether they recommend providers. The National Association of Insurance Commissioners (NAIC) website has a tool to verify that an agent or broker is licensed in your state.

Preparing your business information

Before you contact an agent, gather basic facts about your business. The insurance company will ask for your business type and structure (sole proprietorship, LLC, corporation), how many employees you have, your annual payroll, and how long you have been in business. Have your most recent tax return or financial statement available.

You will also need to describe the positions that handle money or valuables — for example, cashiers, warehouse staff, office managers, or accountants. The insurer wants to know how much cash or assets each role typically handles and how often. If you have had any losses to theft or dishonesty in the past, disclose them now; hiding them can void the bond later.

Have employee names and dates of birth ready. The insurance company will likely run background checks on anyone who handles significant assets. If an employee has a criminal record or prior dishonesty claim, the insurer may exclude them from coverage, charge a higher premium, or decline to issue the bond.

Completing the process

The process is a detailed form that asks about your business operations, security practices, and employee management. You will describe how you handle cash — whether you use a safe, how often you deposit money, who has access to keys or combinations. You will explain your hiring process and whether you do background checks.

Be honest and complete. Insurers investigate applications, especially for larger bonds. If you misrepresent your business or omit information, the company can deny a claim later. If the process asks whether you have had prior losses or claims, answer truthfully even if it seems like it might hurt your chances.

The process also asks you to name the people who will be covered — usually all employees, though you can exclude specific roles or individuals. Some bonds cover only named employees; others cover all current and future employees in certain positions. Clarify this with your agent before you sign.

What happens during underwriting

After you submit the process, the insurance company's underwriting team reviews it. They may contact you with follow-up questions about your business, your security measures, or specific employees. They will order background checks on employees who handle cash or valuables — this typically takes one to two weeks.

The underwriter may also verify your business license, check your credit, and review any prior insurance claims. If your business is new or has had losses, underwriting may take longer. Some insurers will not issue a bond if an employee has a felony conviction related to theft or dishonesty, or if your business has had multiple prior claims.

Once underwriting is complete, the company issues a quote with the annual premium and the coverage limits. Coverage limits are the maximum amount the bond will pay for a single loss and the maximum per year. A typical small business bond might cover up to $25,000 per loss and $50,000 per year, though these numbers vary widely.

Understanding coverage limits and exclusions

A fidelity bond does not cover every type of loss. It covers direct theft of money or property by an employee — for example, a cashier pocketing cash from the register or a warehouse worker stealing inventory. It does not cover losses from fraud by customers, losses from poor business decisions, or losses from negligence.

The bond also has a deductible — an amount you pay out of pocket before the insurance pays. A common deductible is $500 or $1,000. If an employee steals $2,000 and your deductible is $500, the bond pays $1,500. The bond also has a limit per loss and a limit per year. Once you hit the annual limit, the bond does not pay for additional losses that year.

Read the policy carefully or ask your agent to explain what is and is not covered. Some bonds exclude losses discovered after an employee leaves, or losses that take place over a long period. Others have waiting periods — the bond does not cover losses in the first 30 or 60 days after it starts.

Paying the premium and activating the bond

Once you accept the quote, you pay the premium — usually the full annual amount upfront, though some insurers allow monthly payments. The premium depends on your business type, size, payroll, and the coverage limits you choose. A small retail business might pay $300 to $800 per year; a larger business or one in a higher-risk industry might pay more.

After payment clears, the insurance company issues a certificate of insurance or a policy document. This is your proof that the bond is in place. Keep a copy for your records and provide one to your employer, client, or regulator if they require it. The bond is now active and covers losses that occur during the policy period.

Before the policy expires, your agent will contact you about renewal. You can renew with the same company, shop around with other insurers, or drop the bond if you no longer need it. If you have had no claims, renewal is usually straightforward and the premium may stay the same or decrease slightly.

Filing a claim if theft occurs

If you discover that an employee has stolen money or property, contact your insurance agent or the insurance company when ready. Do not wait — most policies have time limits for reporting. You will need to provide documentation: the amount stolen, when it was discovered, how you know it was theft, and any police report or investigation findings.

The insurance company will assign a claims adjuster who will investigate. They may interview employees, review security footage, or request financial records. The process can take weeks or months. Once the investigation is complete, the company will either approve the claim and pay you (up to the coverage limits and minus the deductible) or deny it if they find the loss is not covered.

Keep detailed records of the theft, your investigation, and all communication with the insurance company. If the claim is denied and you believe it should be covered, you have the right to appeal or pursue the matter further, though this may require legal help.

Frequently Asked Questions

Do I need a fidelity bond if I have only one employee?

It depends on what that employee does. If they handle cash, valuables, or sensitive financial information, a fidelity bond is worth considering. Many small businesses with one or two employees carry a bond. The cost is usually modest, and the protection can be significant if theft occurs.

Can I get a fidelity bond if one of my employees has a criminal record?

It depends on the nature of the record. An employee with a felony conviction for theft or dishonesty will likely be excluded from coverage or cause the insurer to decline the bond altogether. An employee with an unrelated felony or a misdemeanor may still be covered. Ask your agent to discuss the specific situation with the underwriter before you explore.

What is the difference between a fidelity bond and a surety bond?

A fidelity bond protects you if an employee steals. A surety bond guarantees that you will perform a contract or follow the law — for example, a contractor surety bond guarantees the contractor will finish the job. They are different products for different purposes.

How long does it take to get a fidelity bond?

From process to policy issuance usually takes one to three weeks, depending on how quickly you provide information and how thorough the underwriting is. Background checks typically take one to two weeks. If there are complications or the underwriter needs more information, it can take longer.

Can I cancel a fidelity bond before the year is up?

Yes, you can cancel at any time. Some insurers will refund a portion of the premium if you cancel early; others will not. Check your policy or ask your agent about the cancellation terms before you buy.