Fidelity Insurance vs Fiduciary Insurance

I was asked recently about fidelity insurance.  As I mentioned in a prior post, fidelity insurance is employee theft coverage; AKA employee dishonesty insurance.

Fiduciary coverage is very different.

Fiduciary coverage is liability protection against allegations that you have violated the federal law governing employee benefit plans – known as ERISA.

Fidelity is crime insurance – against the loss of assets stolen by an employee.

Fiduciary is liability insurance – protecting you from a lawsuit brought by an employee or an outsider.

To further confuse matters…

ERISA requires that the assets of an employee benefit plan (retirement fund, 401k, etc.) be protected by a fidelity bond.

So, any employer with a benefit plan needs two types of insurance.

First, there is fiduciary coverage to protect from a lawsuit alleging a violation of ERISA.

Second is a fidelity bond protecting the assets of the plan from theft and fraud.

Class dismissed.