What is a 'Blanket Honesty Bond'

A blanket honesty bond is a fidelity bond that protects employers from losses due to dishonest acts of employees. It also is known as commercial blanket bond.

Breaking Down 'Blanket Honesty Bond'

Blanket honesty bonds and other fidelity bonds are types of insurance. Acts covered can include theft, embezzlement, forgery, and destruction of assets. Also covered may be forged checks, counterfeit currency, fraudulent trading, and property damage. Losses from such acts are covered even if the employees responsible cannot be identified. The process of buying a fidelity bond helps employers filter out those who are likely to commit crimes, because commercially purchased fidelity bonds will not cover employees with any history of dishonest acts. Some businesses such as brokerages, cash carriers, messenger services, courier services, in home care providers, nursing homes or other in home services also obtain these bonds for the security of their clients. The owner of the business purchasing the bond may be included in the coverage.

Honesty bonds

An honesty bond is posted by an organization or professional to ensure the honesty and integrity of the bond issuer and its employees. It is also known as a fidelity bond, an employee dishonesty bond or business service bond. Such bonds either protect a business from wrongdoing by its employees, a business's clients from theft by that business's employees or both. These bonds have nothing to do with investing, but rather they relate to business operations and function like insurance. For employees working on site with customers, honest bonds provide the employer with coverage for employees' fraudulent or dishonest acts. For example, such a bond would reimburse a cleaning service employer for employee theft from a customer. The proceeds could be used to reimburse the customer.

Other types, such as pension or ERISA fidelity bonds, are tailored for specific employees in an organization, such as those who administer pension plans. ERISA fidelity bonds are required by tax law to cover at least 10 percent of the assets if a business has a defined benefit pension plan. The maximum bond required is $500,000 or $1 million if the plan holds employer securities. No deductible is allowed in the bond, and it must be in the name of the plan or trust, not the employer, or the bond must state that the plan or plans are covered and that the general bond deductible does not apply per ERISA requirements. The bond protects against dishonesty by those handling the company's pension plan.

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