You hired “Trustworthy Tim.” A month later, a client catches him on a nanny cam stealing cash from a wallet. The client demands $500. You turn to your Surety Bond, assuming it’s an easy fix. The Bonding company asks: “Has he been convicted yet?”
Key Takeaways
- Conviction Clause: Surety Bonds generally require a criminal conviction to pay out. If Tim disappears or the DA drops the case for lack of evidence, the bond pays $0.
- Employee Dishonesty Insurance: This is superior to a bond. It pays upon “Proof of Loss” (video evidence), not conviction.
- The “Knowledge” Exclusion: If you knew Tim had a past theft record and hired him anyway, all theft coverage is void.
- Paying Out of Pocket: For small amounts ($500), it’s often faster/cheaper to pay cash and fire Tim than to navigate the bond claim.
The “Why” (The Trap): The Burden of Proof
Bonds are not for you; they are for the client. But the barrier to collect is high.
The Trap: The police in 2026 rarely pursue petty theft under $1,000. Without a police report and a judge’s ruling, the Bonding company says, “Allegation unproven.” You are left with an angry client and a worthless piece of paper.
Employee Dishonesty Insurance (part of a BOP) is a contract between you and the insurer. If you show them the video, they reimburse you so you can reimburse the client.
The Investigation: Bond vs. Insurance
I compared the payout process.
1. Janitorial Bond ($100/yr)
- Process: Client files claim -> Bonding Co investigates -> Demands police report/conviction -> Pays Client -> Sues YOU.
- Verdict: Terrible for small claims.
2. Commercial Crime Policy (Travelers)
- Process: You file claim -> Submit Video -> Insurer Pays You.
- Verdict: Much smoother. Covers “Theft of Client’s Property.”
3. Background Check Services (Checkr)
- My Analysis: Insurance requires you to run checks. If you didn’t, coverage is void.
Comparison Table: Theft Payouts
| Feature | Surety Bond | Employee Dishonesty Ins. |
| Trigger | Conviction (Usually) | Evidence (Video/Confession) |
| Who gets paid? | Client | You (to pay Client) |
| Do you pay it back? | Yes (to Bonding Co) | No (Subject to rates) |
Step-by-Step Action Plan
- Fire the Employee: Immediately.
- Secure Evidence: Save the nanny cam footage. Get a written confession if possible (“I took the $500”).
- Repay the Client: For $500, write a check immediately. Do not wait for insurance. It saves your reputation.
- File Police Report: You must file a report to trigger insurance, even if the police don’t arrest him.
FAQ Section
If I pay the client, does that admit guilt?
Yes, but if you have video, guilt is established. Reputation management is more important here.
Does this cover me stealing?
No. Owners are excluded.
Can I deduct it from his final check?
Check state labor laws. In California/New York, absolutely not without written consent.