Crime Insurance / Fidelity Bond
Crime insurance covers a business for direct financial loss from dishonest acts such as employee theft, forgery, and fraud, sometimes including impersonation schemes. A fidelity bond is a related form focused on employee dishonesty. See Crime / Fidelity.
Last updated October 13, 2026
How crime insurance and fidelity bonds work
Standard property and liability policies generally do not cover most theft and fraud losses, so businesses buy separate crime coverage. A commercial crime policy is usually first-party coverage: it reimburses the insured for its own losses. Depending on the wording, it may address employee theft, forgery or alteration of checks, funds transfer fraud, computer fraud, theft of money and securities, and impersonation or social engineering fraud, sometimes with lower sublimits.
The term fidelity bond is used loosely. Historically it referred to bonding that protects against employee dishonesty, and many sources use it for employee dishonesty coverage that is sold within or alongside a crime policy. Some markets also distinguish coverage that protects a customer or client from an insured's employees, sometimes called third-party crime. Terms vary by insurer, so read the policy form.
One form is required by law. ERISA generally requires every fiduciary of an employee benefit plan and everyone who handles plan funds to be bonded against fraud or dishonesty. The bond amount is generally at least 10 percent of the funds handled, with a $1,000 minimum and a $500,000 maximum, or $1,000,000 for plans holding employer securities. This is separate from fiduciary liability insurance.
Example
A payments startup has a finance employee who quietly diverts small transfers to a personal account over several months. When the scheme is found, the company reports a loss to its crime insurer. Whether the loss is covered depends on the policy's employee theft wording, discovery period, retention, and investigation requirements.
What to watch for
- Social engineering wording. Coverage for impersonation and payment-redirection fraud may be excluded, added by endorsement, or capped at a sublimit. Verification procedures may be required.
- Discovery versus loss period. Many crime forms respond to losses discovered during the policy period or shortly after it ends, so timing matters.
- Who counts as an employee. Contractors, temps, and owners may be treated differently.
- Cyber overlap. Crime policies generally do not cover data breach response, which sits under cyber coverage. See social engineering fraud.
Crime insurance vs. related terms
- Crime vs. cyber. Crime covers the theft of money, securities and property. Cyber covers breach response, extortion, restoration and liability for data events. Computer fraud and funds transfer fraud can sit in either, so confirm which policy responds to which scenario.
- Fidelity bond vs. surety bond. A fidelity bond protects against employee dishonesty and works like first-party insurance. A surety bond is a three-party guarantee that a principal will perform an obligation, such as completing a contract or following a license requirement.
- Crime vs. fiduciary liability. Fiduciary liability covers claims that plan fiduciaries mismanaged a benefit plan. An ERISA bond protects the plan from dishonest handling of its funds. They are different policies.
- First-party vs. third-party crime. Most crime coverage protects the insured's own money and property. Some policies add client or third-party property coverage, which protects customers' property in the insured's care. See first-party coverage.
- Crime vs. social engineering fraud. Social engineering is a type of fraud in which an employee is tricked into sending money. It is often an add-on or sublimit within a crime policy, sometimes also offered under cyber.
Second example: a vendor payment redirect
A hypothetical fintech's finance team receives an email that appears to come from a known vendor, asking to update bank details for the next invoice. An employee changes the details and sends a large payment to a fraudulent account. Many standard crime forms address theft by outsiders but may exclude loss where the company's own employee voluntarily sent the money. Coverage for this kind of fraud is often provided by a social engineering endorsement, usually with a sublimit and conditions such as call-back verification before changing payment details. Whether this loss is covered depends on those conditions, the sublimit, the retention and how the policy defines the loss. See business email compromise.
Questions to ask your broker or underwriter
- Is the policy written on a loss-sustained or discovery basis, and how long is any discovery period after it ends?
- Who counts as an employee, and are contractors, temporary workers, officers and former employees included?
- What is the limit for social engineering and funds transfer fraud, and what verification steps does the insurer require?
- Does the definition of money, securities and property include digital assets? See digital asset insurance.
- Is there client or third-party property coverage, and does it fit our customer agreements?
- What are the retention, the notice requirements and the deadline for proof of loss?
- If a benefit plan requires an ERISA bond, does the form meet that requirement?
Why it matters for technology, AI, fintech and digital-asset companies
Companies that move customer funds, control wallets, or hold client assets face theft and fraud exposure that other policies do not address, and partners or regulators may require fidelity coverage. Digital assets in particular are handled inconsistently in standard crime wording, so definitions of "money," "securities," and "property" deserve close review.
Venture-backed fintech and digital-asset companies often scale transaction volume faster than their internal controls, which is exactly where employee theft and payment fraud tend to happen. Counterparties such as banks, custodians and funds sometimes require a fidelity or crime policy with certain limits before onboarding. For crypto businesses the most important wording is how the policy treats keys, wallets, hot and cold storage and tokens, which differs widely from form to form. See digital assets and crypto and cyber and technology E&O for more.
See how this applies in practice: fidelity and crime insurance and fintech insurance.
Related terms
Related coverage
Frequently asked questions
What is crime insurance (fidelity bond)?
Crime insurance covers a business for direct financial loss from dishonest acts such as employee theft, forgery, and fraud, sometimes including impersonation schemes. A fidelity bond is a related form focused on employee dishonesty. Coverage depends on the policy wording.
What is the difference between a fidelity bond and crime insurance?
The terms overlap. Fidelity coverage traditionally addresses employee dishonesty, while a commercial crime policy usually bundles several coverages, such as forgery, computer fraud, and funds transfer fraud. Some markets use fidelity bond to mean coverage protecting clients from the insured's employees.
Is a fidelity bond required for a 401(k) plan?
Generally yes. ERISA requires plan fiduciaries and people who handle plan funds to be bonded, typically for at least 10 percent of the funds handled, within statutory minimum and maximum amounts. Rules have exceptions, so confirm with a qualified advisor.
Does crime insurance cover social engineering fraud?
Sometimes. Many crime policies exclude or limit loss where an employee is tricked into sending funds, and offer coverage by endorsement with a sublimit and verification conditions. Some cyber policies also address it. Review the exact wording and ask which policy would respond to a payment-redirection scenario.
Does crime insurance cover cryptocurrency theft?
It depends on the form. Many standard crime policies were written around money, securities and tangible property, so digital assets may be excluded or need specific wording. Digital asset programs often use specialized crime or custody coverage with conditions on how keys are stored and approved.
Is a fidelity bond the same as a surety bond?
No. A fidelity bond protects against employee dishonesty and behaves like first-party insurance for the insured's losses. A surety bond is a three-party arrangement in which a surety guarantees that a principal will meet an obligation to a third party, such as finishing a construction project.
How soon must a crime loss be reported?
Policies typically require prompt notice after discovering a loss and proof of loss within a stated period, and many are written on a discovery basis with a limited window after the policy ends. The deadlines vary, so check the policy conditions and report suspected losses early.
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