Understanding Bonding Insurance For Employees

What is a Bond?

A bond is a form of insurance that protects businesses against potential losses caused by internal fraud, theft, or incompetence. If employees make a mistake that results in losses for the company, their insurance provider pays them for the damages. It is a contract and is not something you carry around like a driver’s license but something similar to an insurance policy that applies to a specific employer.

4 Standardized Types of Bonds

  1. Commercial Blanket Bond

This bond is purchased by an employer and covers all employees up to a total policy amount. For example an owner of a store may take out a Commercial Blanket Bond for $50,000.

  1. Blanket Position Bond

This bond insureseach employee for a specific amount. For example, a bank may take out a Blanket Position Bond for each of its employees to a maximum amount of $10,000. If any employee embezzles funds, the bank is covered up to a maximum of $10,000.

  1. Individual Fidelity Bond

This bond is purchased byan individual for themselves. It protectsthe money, merchandise and securities they are handling. If you were a free-lance janitorial worker in a stores who works off-hours, this bond would protect your employer from possible theft (by you). You could take out an Individual Fidelity Bond for $5,000 for example.

  1. Scheduled Fidelity Bond

This bond covers named employees who perform tasks related to specific positions, which are described in the bonds themselves. For example, the manager is responsible for checking daily cash receipts and making daily deposits. To insure against theft by that employee, the employer may take out a Scheduled Fidelity bond for $2,000.

Q: What companies will provide bonding?

A: Member companies of the Insurance Bureau of Canada.

Q: Can a person with a criminal record be bonded?

A: Yes under certain conditions.

Conditions For Being Bonded

  1. You must agree to full disclosure of all information pertinent to the bonding application. You have to give any information needed to fill in the forms.
  1. You will need sponsorship through a letter of support by the sponsoring agency like Correctional Services of Canada or other sponsor. It indicates that the individual has made satisfactory adjustments and is likely to succeed in their rehabilitation.You can use a co-signerto the bond may help make the applicant more acceptable.
  1. Reasons for bonding decisions are not required. It is understood that a bonding company is not required to give reasons for a “rejection” or provide information, which is normally considered it cannot divulge.
  1. The amount of the bond will not normally exceed $2,500. At the discretion of the individual underwriters, higher amounts may be obtained.
  1. Participation in the program by bonding companies is voluntary.
  1. The bonding company will report to the sponsoring agency indicating that each application for bonding has been accepted or rejected.

How to Apply

The bonding process involves 4 people:

  • Applicant (Employee)
  • Employer/Business
  • Insurance Agent
  • Bonding Company

Steps:

  1. The applicant submits their request to the employer.
  2. The employer submits the request to their insurance agent.
  3. The insurance agent forwards the application to the bonding company to be reviewed.
  4. The bonding company decides if the insurance will be given.

In the event that the employer does not bond their employees, but has requested an individual bond, the normal practice is also to apply through the licensed insurance agent of the employer.

Full Disclosure

Full disclosure of all relevant information is extremely important to this process. If not, an insurer can cancel or void a policy for non-disclosure of material facts or misrepresentation.

Challenging

In the event of a rejection, which is felt to be unjustified in the light of all the circumstances, details can be submitted to:

The Insurance Bureau of Canada

Atlantic Centre, 1969 Upper Water Street, Suite 1706Purdy’s Warf, Tower II Halifax, NS B3J 3R7

Telephone 902-429-2730 Toll Free: 1-844-227-5422

Hours: Mon-Fri. 8:30am -4:30pm

Things to keep in mind:

  • A person with a criminal record will not be automatically excluded.
  • A bond is a legal contract. It isn’t transferable from one employer to another. It’s similar to an insurance policy and is specific to a job and employer.
  • To apply you will need to consent to release your information so that your the sponsor can discuss your application with the insurance agent and or employer.
  • There are no guarantees.If the sponsoring agency does a good job, there is a good change of acceptance. However, you must realize that there are no guarantees and the application may be rejected.