What is Commercial Blanket Bond

Commercial blanket bonds are a type of liability coverage for employers who want to protect themselves against theft, fraud, embezzlement, forgery or related mischief caused by dishonest employees. This liability coverage typically applies evenly to a company's employees, and generally does not apply to a company's customers.

BREAKING DOWN Commercial Blanket Bond

Commercial blanket bonds often cover up unto a set amount of monetary damages, and kick in when the theft or mischief involves one or multiple employees. Commercial blanket bonds also are called aggregate penalty bonds or fidelity bonds.

As their name implies, commercial blanket bonds are broad, and unlike position bonds that cover the activities of employees with certain job titles, a commercial blanket bond covers all employees. Also, these policies almost always cover new company employees, including executives, from the date of they are hired. 

With most of these policies, the onus is not on the insured to prove any employee in particular perpetrated a crime. Companies still can utilize the policy, provided they can show a crime took place.

The cost of commercial blanket bonds varies by provider, but many insurance companies offer this type of coverage. It generally depends on how many employees a company has, and the maximum dollar value of the coverage sought. It's available for a wide variety of companies in most major sectors and industries. Some government organizations also are able to get this type of coverage.

One sector that often makes use of commercial blanket bonds is financial services, especially banks and trading operations.

Example of Commercial Blanket Bond

Say a small construction company has a video that shows several individuals going to a job site after hours in a company truck and stealing valuable equipment worth $40,000. An internal investigation is launched, but the company can't determine who committed the crime. It suspects that several foreman on this particular job are to blame, but it really doesn't know for sure. Say the company has a $100,000 commercial blanket bond. This type of loss typically is covered.

Similarly, say a small trading operation discovers a hidden program deep within its software system that skims slightly from each customer's account. The company determines that $200,000 already has been stolen over the past three years as a result. If the company has a $100,000 commercial blanket bond, it typically will get compensated for half the total loss.

It depends on stipulations within the policy, but most times, each company again would be covered up to $100,000 if there was a second fraudulent incident discovered, even if it's in the same year.