What do fidelity bonds cover?

If an employee makes a fraudulent credit card purchase, funds transfer, or money order, your business might be left on the hook. A fidelity bond compensates your tech business for an employee’s fraudulent activity.

Example: An employee at a web hosting company accesses a client’s credit card information and begins charging personal purchases to the card. The client notices and traces the purchases back to the business. A fidelity bond covers the purchases, so the client gets their money back and the business doesn’t suffer reputational damage.

When an employee steals equipment or supplies from the workplace, your commercial property insurance policy most likely won’t pay for the missing items. Only a fidelity bond always covers theft of property by employees.

Example: Laptops keep going missing from a web design company's office. Eventually, the company catches an employee in the act, but isn’t able to recover all the missing computers. The company's fidelity bond helps cover the cost of purchasing replacement laptops.

Often, employees who forge checks quickly spend or transfer the money they steal, which makes it difficult for your business to recoup these losses from the employee. A fidelity bond pays for any losses you aren’t able to recover.

Example: A project management firm discovers that a payroll employee has been forging signatures on checks to embezzle funds from the business. The employee has already spent the stolen money, so the business recoups its losses with a fidelity bond instead.

If your tech company fails to complete a project or adhere to the specifications of a client contract, errors and omissions insurance (E&O) can cover your legal costs if the client sues.

Example: A data science business promises to deliver insights into the efficiency of a client’s supply chain, but gets tied up in a bigger project and misses the deadline. Its E&O policy helps pay for legal defense costs and the court-ordered judgment when the client sues.

Errors and omissions insurance also helps your business pay legal fees, as well as settlements or judgments, when a client sues over unprofessional or erroneous work.

Example: A computer repair business lands a lucrative contract to repair a university’s computers before the academic year begins. The employees assigned to the project can't find a solution to the errors. E&O insurance helps the business settle with the university.

If an employee accidentally breaks a client’s laptop or causes accidental property damage at a client’s workplace, general liability insurance covers the cost of repairing or replacing the damaged property.

Example: While he’s on an onsite visit, an IT consultant accidentally spills coffee all over a client’s networking hardware. The equipment is destroyed; the client asks the consulting firm to foot the bill. General liability insurance covers the cost of replacing the ruined equipment.

Cyber liability insurance covers the costs of data breaches and cyberattacks, including the costs of responding to the crisis and defending your company against lawsuits from affected parties.

Example: A cyberattack on a network design business exposes clients’ network credentials, putting their businesses at risk. Cyber liability insurance helps the business manage the breach, notify affected customers, and defend the business when the clients sue.