How much do fidelity bonds cost?
The cost of a fidelity bond primarily depends on the amount of coverage you choose. The type of sensitive information your company handles and how many employees can access that information also affect the cost.
What do small businesses typically pay for fidelity bonds?
Fidelity bonds, a type of surety bond, protect your small business against financial loss in the event of employee theft, embezzlement, forgery or fraud. It's often required by clients in order to secure a contract.
The cost of a fidelity bond varies significantly, ranging from as low as $5,000 to more than $10 million. Your exact cost will be based on the size of bond you get, among several other factors.
Examples of fidelity bonds include employee dishonesty bonds, janitorial services bonds, and business service bonds.
If you offer employee benefit plans, you will likely need an Employee Retirement Income Security Act (ERISA) bond. Also known as a fiduciary bond, an ERISA bond provides retirement plans coverage against employee theft and fraud.
How does bond size affect the cost of a fidelity bond?
The cost of a fidelity bond is a certain percent of the total bond amount. For example, if a bonding company charges you 1% of the total bond amount and you get a $2,000 bond, then your cost will be $20.
Businesses where an employee could potentially steal a large amount of money should consider buying a larger bond to match the potential cost of an incident. It will cost more, but provide more coverage.
What other factors impact the cost of fidelity bonds?
Although bond size is the biggest factor in determining your fidelity bond cost, there are other factors that will also influence your cost.
Let's take a closer look at how additional factors may affect the cost of your fidelity bond:
How does your industry determine costs?
High-risk industries, such as IT or finance, will have to pay more for their fidelity bonds compared to smaller, low-risk industries. This is also true for companies that earn a significant income.
How does your credit score influence costs?
A fidelity bond differs from most insurance policies in that the money must be paid back if you use it. For this reason, it can be helpful to think of a fidelity bond more as a line of credit rather than an insurance policy. It's also for this reason why your personal credit score is crucial.
As part of the bonding process, the surety company's underwriters will consider your credit report and financial statements to determine how much to charge.
If you have poor credit, don't worry. You can probably still obtain a bond. However, the cost will be more expensive. That's why having a clean credit history is helpful in keeping costs low since it shows bonding companies that you are capable of paying back the amount if needed.
How does the amount of sensitive information you handle impact costs?
The type and volume of data you work with directly affects fidelity bond costs.
If your business stores minimal data, your costs will be low. For example, a data analysis firm that doesn’t store or manage customer information will pay less than a large business intelligence healthcare company.
If you’re storing large volumes of sensitive customer data like personal information, credit card numbers, Social Security numbers, or medical records, your fidelity bond will cost more as you are at a greater risk for dishonest acts committed by your employees.
How does the number of employees with access to sensitive data affect costs?
It’s a simple numbers game. If more of your people have access to sensitive data, then be prepared for a higher fidelity bond cost. The more access points, the greater the risk of employee theft and fraud.
If possible, limit data access to keep insurance costs down.
How can you save money on fidelity bonds?
There are things you can do to keep the cost of your fidelity bond coverage low.
A couple strategies include:
Paying your annual premium up front
When you buy a bond, you can pay your premium in monthly or annual installments. The annual premium often costs less than paying month by month.
Managing your risks
Small businesses with no previous fidelity bond claims can expect to pay less for business insurance. Business owners can avoid claims by taking measures such as:
- Doing background checks on employees
- Installing a security system
- Training employees on ethical business practices
- Taking a “trust, but verify” approach
Liability claims can be a threat to your business. If you’re accused of injuring someone, damaging property, or causing other harm it could easily turn into a costly lawsuit. That’s why it's important to have the right insurance protection in place to cover a range of potential liability risks.
How do you buy bonds and insurance with TechInsurance?
TechInsurance is a trusted insurance expert for small businesses, including nonprofits, startups and independent contractors, with extensive knowledge of the IT sector. We help small business owners compare quotes from top-rated insurance companies, buy policies based on their business needs, and manage coverage online.
By completing TechInsurance's easy online application today, you can get free quotes for fidelity bonds and other types of insurance. Our insurance agents are available to help answer any questions you may have on the different types of fidelity bonds and bond requirements.
Once you find the right policies for your small business, you can begin your insurance coverage in less than 24 hours and get a certificate of insurance for your small business.
Learn more about business insurance costs
Insurance premiums vary based on the types of policies a business buys. View our small business insurance cost overview or find out the average costs for other common types of business insurance policies.