Does Business Insurance Cover Employee Theft?

Because of how it overlaps with the coverage in a typical business owner’s policy, commercial crime insurance is sometimes misinterpreted or neglected. Owners have a tendency to believe they already have it. Alternatively, they are unconcerned about purchasing it. Most business owners don’t put “staff theft” high on their list of concerns after a year marked by lockdowns and supply chain problems.

SMBs, on the other hand, are increasingly losing money to thieves operating within and around their businesses. According to the most recent statistics, small and mid-sized enterprises account for 68 percent of all employee theft instances, with losses averaging $290,000.

What else we know is that certain industries are more affected than others. According to a 2018 research by the Association of Certified Fraud Examiners, banking and financial services are at the top of the list, with manufacturing, retail, and construction not far behind.

If you think your company can’t afford to lose any money, expensive merchandise, or supplies, read the following business crime/commercial crime insurance FAQs:

Does business insurance cover employee theft?

Most likely not. Some sorts of theft (e.g., a random burglary) are covered under your commercial property insurance… but there are two key exclusions:

  • Theft of cash is not covered by commercial property insurance (only tangible assets like computers or product inventory)
  • Employee theft is not covered by commercial property insurance. It is not included if the offense was committed by you, your partners, or someone on your payroll.

“Really?!?” you might be thinking. So, what’s the point of insurance?” However, when you consider how easy insurance fraud could be done without them, these exclusions make sense. More importantly, now that you’re aware of these exclusions, it’s time to consider filling in the gaps with a commercial crime insurance coverage.

What is business crime insurance or commercial crime insurance?

Business crime insurance is a type of insurance meant to protect companies from theft and fraud. It’s most commonly connected with employee theft since it helps to bridge some crucial gaps between what commercial property insurance can and won’t cover. It’s also known as “fidelity insurance,” “employee theft coverage,” or “employee dishonesty coverage,” among other terms.

However, crime insurance might cover a lot more. It can be written to cover theft or fraud situations involving internal (employee) or external (random thief or cybercriminal) sources, or a combination of both.

Where/how can I buy business crime insurance?

Depending on the type of business you own, you may already have crime insurance included in your total commercial package, along with liability and other coverage. It’s also possible that you’ll need to purchase it as a stand-alone insurance. Request that your agent explain the various carrier options.

Commercial crime insurance is divided into eight categories by the ISO (an organization that creates standard insurance policy language): one for workers and seven for outside perpetrators. Each section covers a different set of terms and conditions. Some insurance companies use the ISO language verbatim in their crime policies, while others just use bits of it. As a result, it’s critical to consider the various types of theft risk that your company may face. Request that your representative walk you through some of the most typical scenarios today. He or she will be able to clarify which insurance and/or endorsements will best meet your requirements.

What does commercial crime insurance cover?

Commercial crime policies, in general, are designed to combat business theft, forgery, embezzlement, unauthorized cash transfers, computer fraud, check fraud, billing, and payroll fraud.

Commercial crime coverage, on the other hand, can be arranged in a variety of ways, depending on your carrier’s products and policy wording. You may need to purchase certain endorsements in addition to a basic crime insurance policy to ensure you are covering your most significant risks. Consider the following scenario:

  • Do you require ERISA protection in the event that your company’s pension plan officer embezzles funds from the company-sponsored plan?

These are some instances of specialized hazards that may necessitate extra thought and underwriting.

Remember that employee theft is rarely a one-time event. Instead, the offense is usually committed over a long period of time. To protect yourself from future losses, have your agent go over the two forms of crime coverage: “loss detected” and “loss incurred.” When a crime is found, the first sort of coverage kicks in as long as your insurance is active (even if the thief started raiding your register five years ago). The latter form is only applicable if the offense happened during the policy’s term.

What is not covered by crime insurance?

There is no uniform list because each policy has its own conditions and exclusions. However, there are some types of losses that are normally not covered by a crime policy, such as:

  • Expenses for investigation (uncovering the crime or proving the full extent of it)
  • Losses incurred if it is discovered that an employee has stolen from you or a previous company (e.g., no coverage for giving second chances)
  • Data that has been stolen (e.g., client lists, company documents, secret recipes, intellectual property)
  • Losses that were entirely based on inventory records were claimed (without clear evidence of theft)
  • Indirect losses (e.g., lost money from missed work days or projects due to stolen computers or equipment)

Does my business need crime insurance?

Anyone who manages a business with a lot of cash and/or high-value inventory should think about crime insurance. Exploring crime coverage is also a good idea if your employees bring cash or products off premises, such as to tradeshows, live events, or as part of a delivery service (e.g., cannabis delivery). Crime insurance is becoming increasingly important for enterprises who sell things online.

Asset misappropriation accounts for 89 percent of all company theft, to give you some perspective. Theft of cash, billing schemes, payment schemes, check and payroll manipulation, and theft of non-monetary assets all fall into this category (which is the most common business crime of all). Are any of these crimes likely to occur on a large scale at your company?

Does crime insurance cover my business against employees who steal from clients?

This is a difficult question to answer. It’s also critical for companies that deploy staff into customers’ homes or offices. What if a member of your landscaping crew steals a laptop from a customer’s vehicle? What if an employee from your IT department takes a credential and then enters an office building after hours?

The short answer is that cases like these may not be covered by commercial crime insurance. Because conventional crime coverage only covers the property of the policyholder, this is the case.

You’ll probably need to ask your agent about adding a business crime endorsement to extend theft coverage to other parties, such as your clients. (In most cases, it’s Clients’ Property Endorsement CR 04 01.) This is a classic illustration of how firms can and should tailor a crime policy to fit their own risk profile.

Does business insurance cover damage or looting that occurs during a riot?

Yes, in most cases. During a riot, strike, or other event of civil upheaval, your typical business owner’s coverage would be sufficient to cover losses (property damage, lost product). If your only concerns are the recent protests in Washington and other places throughout the country, you won’t need separate crime insurance.

What are some tips for preventing business theft?

Whether or not you choose to purchase crime insurance, there are a number of things you can do at work to help deter theft and dishonesty. It’s usually a good idea to install video cameras, especially near cash registers or cash boxes. Another best practice is to keep meticulous records of all cash, cheques, and receipts. Experts recommend immediately marking checks “FOR DEPOSIT ONLY,” and while going to the bank daily is a good idea (to avoid leaving cash and checks lying around), your routines shouldn’t be too predictable (such that employees or their associates know when and where they can find you carrying a lot of money).

Finally, spend the time necessary to hire and retain good employees. Conduct background checks and personality assessments. Contact all references. Foster a positive workplace culture so that good people want to stay. (High employee turnover correlates with theft and dishonesty.) Finally, train your teams to respond to various types of threats—on-site, off-site, and online.

Does a business owners policy cover employee theft?

Employee Theft Insurance, often known as employee dishonesty insurance, protects businesses from employee theft. Employee Theft Coverage pays for losses or damages to money, securities, and other property caused by theft by an employee, whether identifiable or not, acting alone or in conjunction with others.

Employee Theft Coverage is one of the primary categories of coverage under a normal commercial crime policy, and it can also be acquired on a solo basis or bundled with other crime policies. While a standard commercial property policy may provide some limited coverage for losses resulting from third-party criminal activity, it typically excludes property losses resulting from employee theft. Employee Theft Coverage bridges the gap between standard commercial property policies and employee theft.

Is employee theft the same as employee dishonesty?

Employee theft and employee dishonesty are two words that refer to the same coverage in insurance terms. Employee Theft Insurance is often known as employee dishonesty insurance.

Does liability cover employee theft?

Employee dishonesty coverage should be added to your commercial property insurance coverage or BOP if your employees have access to your company’s finances, issue checks, or handle valuable business property.

If an employee forges a check or steals from the cash register, this coverage will pay you back for the loss up to your policy limits. This includes the theft of property or cash, along with illegal electronic funds transfers.

General liability insurance will not protect your company from employee dishonesty. However, it’s likely the first policy you need for its broad protection against third-party accidents.

How does employee theft insurance work?

The Employee Theft coverage endorsement protects an employer from financial loss as a result of an employee’s or a group of employees’ fraudulent activities. The loss can be the result of the employee’s theft of money, securities, or other property belonging to the employer or a third party such as a client.

Does a business owners policy cover employee dishonesty?

There is a particular sort of business insurance, called employee dishonesty coverage, that can assist you out when the worst comes. In many circumstances, this coverage might come as part of your business owners policy, or BOP. It’s generally the most-efficient option for a small business owner to receive this coverage.

What is not covered in business insurance?

What Doesn’t Business Insurance Cover? Losses from some types of natural catastrophes, floods and other catastrophic weather occurrences may not be covered by ordinary commercial property insurance plans. The same is true for consumer property that is kept at your establishment.

Which type of insurance policy will protect a business from theft?

  • A commercial crime liability policy protects your firm from employee dishonesty, fraud, theft, burglary, cyber fraud, robbery, forgery, and losses resulting from these actions.
  • This insurance also covers financial losses to a business due to third-party fraud.
  • The policy also covers the loss of money and assets while they are being transported outside of the insured’s premises.

Why do many businesses purchase insurance to cover losses due to employee theft and shoplifting?

For example, if an employer discovered that an employee had stolen tens of thousands of dollars over time despite company procedures in place to prevent such behavior, loss prevention insurance would reimburse the company up to the policy limit. Because money stolen by employees is frequently wasted and never fully recovered, this is a vital safeguard for a firm. Employee theft of a specific amount of money is regarded a catastrophic event that is probable but unforeseen, much like car theft is foreseeable but unforeseeable, therefore insuring the risk is a prudent business strategy.

What is employee theft?

Employee theft, pilferage, embezzlement, fraud, stealing, peculation, and defalcation are all terms used to describe employee theft, pilferage, embezzlement, fraud, stealing, peculation, and defalcation. Employee theft is stealing by employees from their employers. Pilferage is the act of stealing in small amounts. Embezzlement occurs when a person takes money or property that has been entrusted to his or her care; a breach of trust occurs. Peculation and defalcation are synonyms for embezzlement. Whatever term is used, this problem is an insidious menace to the survival of businesses, institutions, and

Which commercial crime form would provide coverage for a loss that did not?

Which commercial crime form would provide coverage for a loss that did not necessarily happen during the policy period but was revealed during the policy period? AReporting form.