So you've got a contract pending with a client in the financial or banking sector - congrats! Working with clients in finance is often lucrative for IT businesses, and can seriously boost your revenue.
But finance clients also likely have higher demands for security than those in other sectors, which means you'll have to jump through an extra hoop or two before they'll sign a contract with you. (Need help drafting a client contract? Check out our free legal contract templates.)
In particular, many clients in banking and finance will demand that the IT firms they work with carry third-party Fidelity Bonds (also known as Employee Dishonesty Insurance). Here's a look at what those are, what kind of protection they offer, and how your IT firm can secure one quickly so you can start work on new revenue-boosting projects ASAP. (For more tips on strategies to boost your revenue, check out our post "Make Tech Decisions That Boost Revenue.")
What Is a Fidelity Bond?
Fidelity Bonds are a kind of insurance that protect against employee dishonesty, fraud, and theft. They come in two varieties:
- First-Party Fidelity Bonds: These protect the bond purchaser against fraud committed by their employees. So if you buy a first-party bond, it would pay you benefits if one of your employees stole money from the company bank account after you gave them access to handle payroll.
- Third-Party Fidelity Bonds: These protect the bond purchaser's clients against fraud committed by the bond purchaser's employees. So if you buy a third-party bond, it would pay benefits if one of your employees stole money or information from a client's accounts after gaining access to necessary passwords because of an IT project.
When a client of yours in the financial sector demands that you carry Fidelity Bond Insurance, chances are, they want you to have third-party coverage.
Why Do Clients Want You to Have Fidelity Bond Insurance?
As an IT professional, the work you do often requires you to have access to sensitive information (including Social Security numbers, bank account info, or even customer information stored on a client's servers).
When you're working for a financial institution or another business that handles sensitive information or actual money, your employees have access to valuable goods. If one of your employees decides to abuse their access to commit theft, fraud, or forgery, your client stands to lose a lot of money. When that happens, they'll likely sue you for damages.
Those damages could be significant (especially if your employee stole a lot of money or caused your client significant reputational harm), and it's likely your client won't want to work with you unless they're sure your business has the financial wherewithal to pay those damages without going bankrupt.
Enter third-party Fidelity Bonds.
When an incident of theft or fraud leads to a client loss and lawsuit, your Fidelity Bond protection has you covered - and, in turn, has your client covered.
Fidelity Bonds are unusual in this respect: most types of insurance don't offer protection for acts of intentional wrongdoing. In contrast, Fidelity Bonds are specifically designed to protect you when someone who works for you breaks the law and causes financial losses.
How Can I Get Fidelity Bond Coverage?
Both first-party and third-party Fidelity Bonds are a type of insurance coverage, so you can buy them from your business insurance provider. TechInsurance offers this type of coverage, and we actually just expanded our third-party Fidelity Bond offerings. For you, this means that you'll have a better chance of finding the type of coverage you need at a price that works for your budget.
Still have questions about how Fidelity Bonds work? Chat with a TechInsurance agent for answers!
