Bonding an employee is an insurance agreement guaranteeing repayment for financial loss caused to the covered organization by the act or failure to act of an employee. Bonding is used to protect the financial operations of companies and unions. This insurance policy is intended to protect businesses from losses caused by acts of fraud or dishonesty by officers, employees, or other representatives.
Why should I bond my employees?
Purchasing a bond plan keeps your employees honest. But more important than maintaining employee honesty, a bond plan protects your business. Statistics have shown that more than one-third of bankruptcies are caused by internal theft.
When should I bond my employees?
Most insurance companies have a policy of bonding employees as soon as they enter the company, hoping to prevent future theft. It is more likely that internal theft would be committed by a long-time employee, someone that has been with the company for at least 10-15 years, rather than a new employee. Seasoned employees know the ins and outs of the company’s accounting system. They know how to slowly move money without anyone noticing, and by the time the theft is noticed, it is too late to stop it from causing damage.
What kind of insurance plan can I buy?
There are three different types of bond plans :
oName Schedule or Position Schedule Fidelity Bond : In this plan, coverage is placed on specific employees or positions based on a list that you provide. If you decide to have other people covered, you need to contact your insurance company to add them to the list. In order to receive compensation, you need extensive proof that your employee committed a thievery.
oBlanket Bond : This type of bond covers all employees, and new employees are added automatically. Coverage is individual, and compensation will be provided up the maximum number determined for the individual. It is not required to prove that a certain individual is responsible for the theft.
oPrimary Commercial Blanket Bond : This bond also covers all people in the company. Employees are not singled out; they are treated as one unit. Regardless of how many people are involved in a theft, you will be compensated the same amount.
How do I buy a bond policy?
To start using a bond plan, simply contact your insurance policy. You can have bonding added to your general business policy and your broker can help you decide which type of policy is best for you.
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