To establish a successful firm, business owners put forth a lot of effort. Though it’s a humbling experience, it’s also fraught with danger. Trust and personal relationships are the foundations of any successful business.
Employee’s ‘breach of trust’ is one of the most serious dangers that firms face. There are a variety of reasons for an employee to become dishonest, including financial difficulties caused by a company separation, company restrictions, frustration with professional advancement, or any other financial concerns.
Despite the fact that such employees make up a small percentage of the workforce, employee theft and fraud can result in significant financial losses. Businesses, on the other hand, can be protected from these dangers by purchasing fidelity insurance. Let’s take a closer look at this.
What is Fidelity Insurance?
Fidelity Insurance compensates the insured professional for losses caused directly by fraud or dishonesty committed by their employees. Fidelity Insurance protects firms from the financial consequences of employee forgery, defalcation, embezzlement, and other fraudulent acts.
What is covered by Fidelity Insurance?
A fidelity insurance coverage protects the employer against damages caused by an employee’s forgery, fraud, or dishonesty. For the period of the policy, the loss can be in the form of money or products.
Is Fidelity Insurance Required?
Certain conditions will influence whether or not Fidelity Insurance is a good policy for your company, such as:
- The employee’s track record, standing, and reputation
- The employer’s “good faith”
- Checking account systems are in place
- Employee supervision in general
Types of Fidelity Insurance
Coverage is provided against business losses caused by fraudulent acts committed by a group of employees under a collective policy. The amount of coverage in this form of fidelity insurance policy will be determined by the responsibilities and position of each employee.
Individual policy: An individual policy’s coverage is confined to damages caused by an individual employee’s fraud or dishonesty.
Floater policy: A floater policy provides a group of employees with a single sum of guaranteed pay. To be eligible for this coverage, a minimum of five employees must be present.
Blanket policy: A blanket policy protects a group of employees who are not identified by the promised person’s name. This type of policy is often only offered to well-established businesses.
If the policy must be provided without stating the name of the employee/s, i.e. on an anonymous basis, then all employees who deal with cash or commodities, whether permanently or temporarily or by rotation, must be covered.
Also, the limit can be set for each employee individually or for a group of employees, as the case may be, and the insurer’s obligation in the event of a loss will be limited to the same amount, regardless of the total insured. However, the Insurer may contemplate a higher maximum in the line of the sum covered if the Insured requests it and other relevant criteria are taken into account.
Importance of Fidelity Insurance
Since a fidelity insurance policy protects a business against losses resulting from employee fraud or dishonesty, it is critical for firms to purchase fidelity insurance coverage to be protected against such risks. The following are the advantages of fidelity insurance:
- Employees’ misappropriation of funds is covered by this type of policy.
- It covers the loss of business assets like property, stock certificates, and other valuables.
- The fidelity insurance covers the loss of a customer’s property as a result of an employee’s dishonesty.
- It protects the company from financial disasters caused by a small percentage of the workforce (dishonest employees), which might damage the entire company and other employees.
- This also safeguards a company’s reputation while also offering complete transparency in monitoring and accountability standards.
It is critical and ideal for any organization to consider fidelity insurance as part of their risk management strategy. It’s always better to be careful and take precautions than to be regretful later!
What is the purpose of Fidelity Insurance?
Today, fidelity guarantee insurance cover is a must-have for many firms. To be eligible for fidelity insurance, the company must keep accurate records and information. Fidelity insurance protects damages caused as a result of employee dishonesty or fraud, such as forgery, identity theft, embezzlement, and theft of funds/property or cash, among other things.
Working with fidelity bonds is a simple process. The following is how the fidelity insurance plan works:
- When a business owner has a thorough grasp of the insurance and premium payment, he or she can submit the proposal form together with other essential documents.
- If a loss or damage occurs as a result of an insured occurrence within the policy term, the insured business must immediately notify the insurance company to file a claim.
- To begin the claim, submit all essential documentation to the insurance company, along with a completed claim form.
- After that, the insurance company will perform a survey to determine the extent of the loss.
- Depending on the insurance limitations, terms, and circumstances, the claim amount will be paid out to the covered business if the claim is authorized.
- If the claim is denied, the insurance company will notify the insured company and provide an explanation.
- If the insured business is not satisfied with the resolution, it has the option of taking the matter to court.
- A company seeking fidelity insurance must give a complete list of employees as well as a list of several departments where the company could suffer a loss, owing to the fraud or dishonesty of an employee or employees.
- Fill out the proposal form and provide the insurance company with all of the requested information. It’s critical to reveal all relevant details and information to avoid any complications during the claim process.
Required Documents for Fidelity Insurance Claims
- Form for submitting a claim that has been completely filled out and signed.
- A photocopy of the fidelity insurance policy is attached.
- a thorough description of the job responsibilities of the person
- The fraudulent employee’s personal reference
- Report on the internal investigation
- In the event of a theft, CCTV footage will be recorded.
- Theft or embezzlement is the subject of a police report.
- The amount of loss is estimated by the auditors.
- Details on when the loss was discovered
- Witnesses’ statements that can substantiate the loss
- If there is any evidence of stolen property values, such as receipts or invoices, there must also be proof of forgery or identity theft, as well as proof of loss.
- Any employee can receive terminal benefits.