What Does “Bonded” Actually Mean for an Escrow Company? And Why I Think You Should Care
A friend of SeedTrust asked us a great question recently. I suspect a lot of families wonder the same thing without ever asking it out loud:
When an escrow company says it’s “bonded,” what does that actually mean?
It’s a fair question. The word gets used a lot in our industry, usually without much explanation. So let me pull back the curtain a bit.
What does “bonded” mean for an escrow company?
In this context, when an escrow company says it is bonded, it generally means it carries fidelity or crime insurance designed to protect against certain losses caused by dishonest acts, such as employee theft or misappropriation of funds. The exact protection depends on the terms, conditions, exclusions, and limits of the specific policy.
That last part matters. Not every bond or insurance policy is the same, which is why I think families should ask questions rather than simply look for the word “bonded.”
First, the short version
If a company is responsible for holding your money, one of the protections I believe that matters most is a fidelity bond, also commonly referred to as employee dishonesty insurance.
Its purpose is fairly simple: to provide protection against certain financial losses resulting from dishonest acts by covered employees.
In my view, it’s one of the most important protections an escrow company can carry. Errors and omissions insurance is another important piece of the overall picture, but it protects against different types of risk.
At SeedTrust, we carry $100 million in bond coverage protecting the funds we manage, subject, of course, to the terms, conditions, exclusions, and limits of the applicable coverage.
That distinction matters to me.
When we talk about being bonded, we aren’t simply referring to a general business insurance policy. We’re talking about coverage specifically intended to address certain risks involving dishonesty, theft, or misappropriation.
What does a fidelity bond protect against?
Generally speaking, fidelity coverage is designed to protect an insured organization against certain losses caused by dishonest or fraudulent acts committed by covered employees.
Depending on the policy, that can include risks involving theft, fraud, embezzlement, or other dishonest acts involving money or property.
The National Association of Insurance Commissioners describes fidelity insurance as coverage that indemnifies an employer for losses caused by dishonest or fraudulent acts of covered employees.
That is an important distinction because a fidelity bond is not the same thing as general liability insurance, cyber insurance, or errors and omissions coverage. Each is designed to address different risks.
And, like any insurance policy, a fidelity bond does not mean every conceivable loss is automatically covered. Coverage depends on the actual policy.
For families trusting an escrow provider with substantial journey funds, I think understanding that distinction is worth the few minutes it takes.
The part most people don’t think about
Here’s the part I find most interesting.
A bond isn’t only about the coverage itself. Obtaining substantial fidelity coverage also involves an underwriting process.
Insurance companies are taking on financial risk when they issue coverage. Before doing so, they evaluate the risk they are being asked to insure. Depending on the carrier and policy, that process can involve reviewing information about the organization, its operations, controls, financial position, claims history, and other risk factors.
At SeedTrust, our $100 million bond is subject to detailed annual underwriting requirements.
I think that matters.
But I also want to be precise about what it means.
A large bond should not be treated as proof that an escrow company is trustworthy, nor should bonding be the only thing you evaluate. It is one part of a much bigger financial protection picture.
Families should also be asking about internal controls, independent oversight, account transparency, who can authorize transactions, how funds are held, and what other insurance coverage is in place.
A bond is one layer.
The systems surrounding the money matter too.
Wait, is it a bond or insurance?
Both, really. This one trips people up, and that’s understandable.
The Surety & Fidelity Association of America explains that employee dishonesty insurance is often broadly referred to as a fidelity bond. Historically, fidelity bonds were structured differently, but today the term commonly refers to insurance protecting an organization from certain losses caused by dishonest employee conduct.
So when you hear terms such as:
Fidelity bond
Employee dishonesty insurance
Crime insurance
you may be hearing descriptions of closely related forms of protection.
That does not mean every policy is identical. Coverage varies, which is why I would always recommend asking an escrow provider exactly what coverage it carries rather than relying on terminology alone.
Florida insurance law offers another useful reference point. Florida defines “fidelity insurance” to include insurance related to the fidelity of people holding positions of public or private trust and certain losses involving money, securities, and other property.
In other words, this is an established category of financial protection, not simply marketing terminology.
The word “bond” has just stuck around as the industry evolved.
It’s a little like how we still “cc” people on emails, long after anyone has touched a sheet of carbon paper.
Why does bonding matter in surrogacy escrow?
Surrogacy and egg donation escrow are unusual because an escrow provider may be responsible for holding significant funds over an extended period of time.
Those funds may eventually be used for surrogate compensation, reimbursements, medical expenses, insurance related expenses, professional fees, and other payments required under the parties’ agreements.
So I think families have every right to ask:
What protections are in place around my money?
Being bonded is one answer to that question.
It shouldn’t be the only answer.
When evaluating an escrow provider, I would also want to understand who oversees the accounts, what controls prevent one individual from moving money without review, how transactions are documented, whether independent audits are performed, and what happens if something goes wrong.
Those are reasonable questions when you’re trusting an organization with funds connected to something as important as building your family.
What should you ask an escrow company about its bond?
You don’t need to become an insurance expert.
But there are a few straightforward questions worth asking:
- What type of bond or insurance coverage do you carry?
- What is the coverage limit?
- What types of losses is the coverage intended to address?
- Are client funds included within the scope of the applicable coverage?
- What other financial controls and insurance protections are in place?
- How are escrow accounts monitored and audited?
- Who has authority to approve or move funds?
And one more question I think is especially important:
Can you explain all of this to me in plain English?
If someone is going to hold your money, you should feel comfortable asking how that money is protected.
Why I’m telling you all this
I know insurance terminology isn’t the most exciting reading.
But if you’re trusting us with the funds for your journey, I’d rather you understand exactly what we mean when we say we’re bonded than simply take our word for it.
At SeedTrust, our $100 million bond is one part of a broader approach to financial safeguards, oversight, and accountability.
More importantly, I think families should know what questions to ask of any escrow provider they are considering.
You’ve got enough on your plate while you’re building your family.
Whether your money is being responsibly managed shouldn’t be one more thing to worry about.
If you’re an intended parent, surrogate, agency, attorney, or fertility professional and have questions about how SeedTrust manages and protects journey funds, our team is always happy to explain our process.
Regards,
Adam Winder
President & CEO
SeedTrust Escrow
Building Your Family Starts With Trust
Before you choose an escrow provider, ask the right questions. Learn how SeedTrust protects your funds, provides transparency throughout your journey, and gives you the confidence to move forward.