How to Bond Your Employees & Use Blanket Liability Insurance

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You may run checks on your employees before you hire them, but you cannot always predict how they might act in the future. You can, however, insure your business to protect against issues such as dishonesty, theft and fraud by taking out a bond or blanket dishonesty insurance. This also tells your customers that you are looking out for their interests as well.

Protecting Your Business

Ask yourself who in your organization has access to funds, handles money, or has any opportunity for fraud. You will be able to secure either a named individual bond (covering any person you name) or a blanket bond (covering dishonest acts of all employees). Evaluating your employees and their roles will help you decide which bond is right for you.

Look at your books. Examine the level of cash flow that is taking place and look for areas where an employee could manipulate incoming or outgoing funds without drawing much attention. When you isolate these areas, ask yourself how much could potentially be taken, then use that figure for the bond or insurance amount you will buy.

Contact your insurance agent to request a quote. Before you buy a bond, or add an endorsement to your business policy, ask about the options available, and what types of fraud and dishonesty are covered. Will the bond cover theft from customers? Are owners, executives, and board members covered?

Decide whether you need a blanket or named individual bond. A blanket dishonesty bond covers all employees, while a named individual bond covers only specific employees. The more employees you have accepting or disbursing funds, the more likely it is you will want to buy blanket coverage. If you are using a named individual bond, you will need to submit an application with the individuals' personal information and signature of a company representative.

Advertise it. If you are a business that bonds employees for the protection of your customers (like a contractor or home health/hospice business) you may want to note this on your business cards and marketing materials. This will help customers feel at ease allowing you into their homes.

Tips

  • One advantage to a named individual bond is that each person you bond will need to complete an application which may be subject to a surety company's background check. This could be a benefit to employers who do not normally run background checks on employees.

    Good separation of duties is an excellent safeguard against fraud. For instance, the employee that has check writing authority should not be the same employee that balances the checking account.

Warnings

  • Some dishonesty coverage found in insurance policies only protects the employer. If you have a business that sends employees into the homes of your customers (contractors, cleaning service, home health care) you may need a separate bond that will indemnify customers if your employees steal from them.

    Many dishonesty bonds for janitorial services and contractors have a conviction clause, meaning that they only pay if your employee is actually convicted of theft.

References

About the Author

Grant Sullivan's writing has appeared in manuals and how-to websites, such as eHow. He holds a Bachelor of Arts in organizational management as well as the Certified Insurance Counselor Designation. He has been writing since 1999. An insurance professional, his writing focuses on business, management, personal finance, insurance, and risk management.

Photo Credits

  • Jacob Wackerhausen/iStock/Getty Images