Do bonds cover employee dishonesty?

Complete Guide to Bonds Covering Employee Dishonesty

Why This Question Matters for Colorado and Utah Residents

Understanding whether your bonds protect you from employee dishonesty is critical for business owners across the region. In areas like Denver, Fort Collins, Salt Lake City, and beyond, local businesses face real exposure to internal theft and fraud risks. Here’s why this matters locally:

• High Claim Frequency: Northern Colorado has seen a 22% increase in commercial theft-related claims, making dishonesty a real issue for businesses, especially in retail and contracting.
• Regulatory Complexity: Colorado and Utah laws often require specific types of bonds for licensing or contract work, but most do not require coverage for employee dishonesty unless you're in a regulated financial or public sector.
• Financial Impact: The average claim paid by fidelity bonds in the region is over $38,000, an amount that could devastate a small or medium-sized business.

What Most People Get Wrong

A common misconception is that all business bonds automatically protect against employee theft, embezzlement, or fraud. In reality, standard license, permit, and performance bonds do not cover dishonesty unless a fidelity bond is purchased separately.

Another misunderstanding: assuming that adding a new employee is enough, when most fidelity bonds require scheduled coverage and regular review of your employee list and risk profile—especially important in high-turnover industries like hospitality and retail in Colorado and Utah.

The Complete Picture

Fidelity bonds, sometimes called employee dishonesty bonds, specifically protect your business from financial losses arising from dishonest acts committed by employees—such as theft of cash, property, or confidential information. Other common bond types—like contractor license, performance, payment, or permit bonds—are designed to protect clients or regulators, not your business, and do not cover internal theft or fraud unless a specific rider or endorsement is added.

Premiums for fidelity bonds in Colorado and Utah typically range from 0.5%–1.5% of the coverage amount, and claims are paid much faster than lawsuits against employees. Having the right fidelity bond in place also gives your clients confidence and helps you win contracts—especially in sectors where trust is paramount (such as construction, energy services, and professional offices).

Making the Right Decision for Colorado and Utah Residents

Question 1: Does my business face meaningful risk from employee dishonesty?

Assess your exposure honestly. Many industries in Colorado and Utah—including construction, retail, and professional services—report ongoing risks and rising regional claim rates.

• Do you handle cash or valuable inventory on-site?
• Do employees have access to your finances, safes, or client accounts?

Question 2: What type of bond do I currently have—and does it include fidelity coverage?

Don’t assume all bonds are the same. Review your existing bond portfolio with a licensed specialist:

• Standard bonds (license, performance, permit) do not include dishonesty unless you’ve specifically purchased a fidelity bond.
• Ask your agent for documentation showing which risks are covered and compare to your actual business exposures.

Question 3: How do I make sure my coverage grows with my business?

As you hire more staff or take on bigger contracts, your risk profile changes. Regular policy reviews—and timely increases in fidelity bond limits—are especially vital in high-growth urban areas like Fort Collins, Denver, or Salt Lake City, where expanded operations often mean more personnel and greater exposure.