"Matchless Manufacturing Co.'s options for recovering its losses were limited, because the company carried no bonding insurance. We were totally unaware that such a thing even existed," says Welch.

So-called "surety" or "honesty insurance" guarantees reimbursement for financial losses caused by another's dishonesty, default, or fraud. According to Harold Russell, former general auditor for Eastman Kodak Co. and a counselor to small businesses through the Service Corps of Retired Executives, the insurance is available in five forms through most agents. Individual bonds are best when the number of employees you want to insure is very small; the bond is for a stated amount and applies only to a named individual. Name schedule bonds allow you to insure several specified individuals under a group policy. Position schedule bonds insure against dishonesty by any individual occupying a specific type of job; the bond does not change, even if you change bookkeepers, for example. Both the Commercial blanket bond and the blanket position bond cover all employees and officers of a company; the latter includes a collusive loss feature, which allows you to recover up to the full limit of the coverage for each person identified as a participant in collusion. Even more comprehensive protection, including coverage for losses through burglary, vandalism, acceptance of counterfeit currency, etc., is obtainable under blanket crime or dishonesty, disappearance, and destruction policies.