Fidelity Bond Insurance Coverage: Frequently Asked Questions (FAQs)

WHY DO ORGANIZATIONS NEED FIDELITY BONDS?

Certain government funding sources require that recipients of grants and contracts obtain a fidelity bond.

If you offer your employees a 403(B) retirement plan, you are legally required to have ERISA insurance that covers a percent of the plan's assets. ERISA insurance is an automatic endorsement to the Maryland Nonprofits Fidelity Bond. Some companies that offer 403(B) plans provide the required insurance coverage, others do not. You should check with your 403(B) provider to determine if you need this coverage.

In addition, many people believe it is prudent management to have a fidelity bond. A couple hundred dollars per year is easier to budget than to be faced with the potential, however unlikely, of a large loss from employee theft. Contributors may not be pleased if they learn that their donations are going to pay for a deficit caused by a dishonest employee.

HOW MUCH FIDELITY BOND SHOULD WE PURCHASE?

The amount that your organization purchases will depend upon your total budget, the accounting controls you have built into your system and the requirements of your funding sources. You need to review you contracts with funding sources, some may require a certain amount of fidelity bond, or that you have a fidelity bond equal to a percentage of the contract amount.

MY ORGANIZATION ALREADY HAS GENERAL LIABILITY INSURANCE - ISN'T THAT ENOUGH?

No. To put it simply, general liability coverage is extremely limited. For example, if somebody slips and falls in your office and sues your organization for their injuries - that's likely to be covered by your general liability policy. However, if the same person steals money from the organization, the loss resulting from the employee's dishonesty would not be covered. However, some general liability policies have endorsements for employee dishonesty and ERISA insurance.

CAN WE BUY OTHER TYPES OF INSURANCE THROUGH THE MARYLAND NONPROFITS PROGRAM?

Maryland Nonprofits offers a Directors & Officers Liability Insurance Program. Gorges & Company, Incorporated, the exclusive broker handling the Maryland Nonprofit D & O Program and the Fidelity Bond Program, is a full service insurance company. If you do not have an existing relationship with a broker or if you wish to change brokers, you can contact Rob Cannon at 410-561-8280 who will work with you on your insurance needs.

I LIKE MY CURRENT INSURANCE BROKER, CAN I BUY THIS POLICY THROUGH HER?

No. To keep the cost of this insurance as low as possible, we must keep administrative costs low. Using only one broker reduces costs. If you have a good relationship with your insurance person, you can continue to purchase other insurance products through her. Maryland Nonprofits has authorized Gorges & Company Incorporated to be the only broker for this program.

MY ORGANIZATION NEEDS MORE COVERAGE THAN $250,000 - AM I STILL ELIGIBLE FOR THIS PROGRAM?

Yes, you are still eligible, but your rates may be different. Complete the application and you will be given a quote.

MY CURRENT POLICY RUNS FOR ANOTHER FOUR, SIX, OR EIGHT MONTHS - WHAT CAN I DO?

You have two alternatives. You may apply so this policy becomes effective when your current policy expires. Or you can cancel your policy and get a refund on premiums that have been paid. The penalty is a maximum of about 10% of the premium. You will need to contact your existing insurer to determine the exact cost of canceling your policy. Don't cancel your existing policy until you receive confirmation of coverage from Travelers Property and Casualty.

If you are interested in requesting an application, call Rob Cannon at Gorges & Company, 410-561-8280, toll free at 800-449-8280, or email him at robc@gorgesco.com.