Fidelity Bonds Protect When Financial Policies Fail

Even the best-laid audit control plans and policies can be foiled by crafty employees. The important question is, are you protected in the case your policies fail?

As the biller in a large practice called insurers about overdue accounts, she discovered that many claims had been paid for. After asking for a front-and-back copy of the reimbursement check, the employee was shocked to find her supervisor's signature as the depositor. All told, the supervisor had taken about $65,000. The supervisor had a friend at the bank who agreed to deposit the checks into the supervisor's personal account.

In a solo surgeon's practice, the manager was caught day trading with the practice's checking account. At the point the surgeon discovered the problem, $20,000 had already been lost.

Both practices endured an unfortunate event, but the large practice had purchased a fidelity bond and recouped its $65,000 loss. The solo surgeon didn't have a bond, and had to write off the $20,000 as a loss. The moral? Even if your procedures seemingly are air-tight, cover all cash-handling employees with a fidelity bond for added protection.

Blanket vs. Name
Consider purchasing a "blanket" bond, which covers a number of employees, not specific employees by name. Unlike a "name" bond, you won't be required to update the policy with new employee names each time someone leaves the practice. Also, blanket bonds typically do not require employee background checks, which makes them easier to administer.

Average Costs
An annual fidelity bond premium varies according to the number of covered employees, and the amount of coverage you want. If you want to cover 10 employees, you can expect to pay somewhere around $240 per year for $25,000 in coverage and $325 for $50,000 in coverage. Similar to other loss policies, the amount proved stolen is reimbursed in full, up to the amount of the coverage purchased.

Buy Through Your Broker
Contact your insurance broker to apply for a fidelity bond. As an alternative to a bond, your agent or insurance broker may recommend adding a rider to the practice's existing general insurance policy because some insurers cover employee dishonesty, embezzlement, money and securities, and other criminal acts as add-ons to their general policies.