Insurance helps your business manage and reduce risk. When you buy insurance policies, you’re buying financial protection from certain common issues. Buying the right kind of insurance is critical if you want to protect your business to the fullest extent possible. In some cases, you might need to purchase a policy that offers protection from issues not covered by typical business property or liability insurance. Some policies offer protection against issues that only affect certain types of businesses, such as medical malpractice insurance for doctors.
Other types of policies offer protection for a broad range of organizations and businesses and that protection typically falls outside of what’s covered by a standard policy. For example, a crime insurance policy can offer coverage that you wouldn’t receive under a standard commercial property policy.
What Is Crime Insurance?
Crime insurance covers losses that your business might experience as a result of a crime. Different types of crime insurance policies might offer protection against theft by an outside party or theft by a person who works for your company. They can also offer protection against fraud or impersonation. Depending on the size and scope of the policy, they might protect against the loss of cash, assets or inventory, up to a specific amount.
Businesses in a variety of industries and of all sizes can benefit from purchasing a crime insurance policy. Crimes such as fraud can take place across all departments in a business, from the help desk to the legal department. The higher up the chain of command the fraud occurs, the most costly it is for a business. The 2018 Report to the Nations reports the median loss for fraud committed by executives or owners was $850,000. The median loss for employee fraud was $50,000.
The loss from fraud and other types of crime can be significant. Without the added protection of a crime insurance policy, a company could potentially go bankrupt or struggle to reach its financial goals after a case of fraud, theft or another type of crime.
Why Crime Insurance Matters for Businesses
Crime is more common than you might think. Many employees will experience a case of embezzlement at their companies more than once during their careers. Yet most companies have no crime insurance coverage.
Businesses lose more than money when they are the victims of crime. In the case of crimes perpetrated by employees, such as embezzlement, a business will need to fire the employees responsible and spend time and money finding suitable replacements for the now-vacant positions. A business can also potentially lose customers as a result of an employee’s embezzlement or other crimes. Insurance can provide protection against the money lost as a direct result of the crime as well as against indirect losses.
What Crime Insurance Covers
Crime insurance policies typically cover a broad range of criminal acts. They offer protection against crimes carried out against your business by the people who work for you and by people who might not have any other connection to your company. Employee and third-party crime coverage typically offer protection against the following:
- Theft of money and assets from your business premises by non-employees: If money or assets are stolen from your premises or seem to disappear without a trace, a crime insurance policy can offer protection. Often, crime insurance also covers damage to your building or property that occurred as a result of the theft.
- Embezzlement and theft by employees: A crime insurance policy can also protect your company against embezzlement, or theft by employees. Embezzlement can take many forms, from a cashier taking money from a register to an employee doctoring payroll and issuing paychecks to staff members who don’t exist.
- Theft by independent contractors: Crime insurance can also provide financial protection against theft by vendors or independent contractors who work with you regularly. Examples of independent contractor theft include billing for services never provided or goods never received by your business.
- Employee dishonesty: Employee dishonesty is a broad category that can include crimes such as forging checks or executives’ signatures or creating fake vendors and false invoices.
- Robbery or burglary: Robbery is theft that occurs with the use of force while burglary is theft that occurs as a result of someone breaking and entering. Both can be covered under a crime insurance policy.
- Loss or theft of money and assets from outside your company’s premises: If money or assets are stolen from your business when they are en route to somewhere else, the theft can still be covered by insurance. For example, if an employee is driving the deposits to the bank and is robbed, a crime policy would likely cover this loss.
- Forgery: If someone forges your company’s checks or writes out fake promissory notes, a crime insurance policy will cover any associated losses. The policy might also cover the cost of legal fees if you need to go to court as a result of the forgery.
- Computer fraud: Computer fraud can take many forms, such as someone impersonating a member of your executive team online or someone sending money from one bank account to another, fraudulently, using a computer or the internet.
- Loss or theft of a client’s assets or property: If one of your customers or clients is robbed on your premises or if a customer’s possessions are stolen by one of your employees, crime insurance can cover the loss.
- Transfer fraud: If a bank takes money from your account because of a fraudulent transfer set up by a thief, crime insurance will protect your business and cover the loss.
- Counterfeit money: If a customer pays for a purchase with counterfeit money or forged money order, crime insurance can cover the counterfeit amount.
What Doesn’t Crime Insurance Cover?
Crime insurance claims examples include a business filing a claim after an employee impersonates an executive and asks the accounting department to deposit a certain amount into a new account every week or a claim after a robbery or break-in. While the coverage offered by crime insurance is broad, there are some things aren’t covered and that your business can’t file a claim for. Some of the things that crime insurance won’t protect against include:
- Theft by the owners or partners: You can’t steal from or rob your own business and expect insurance to cover the loss.
- Embezzlement committed by an employee with a known history of embezzlement: If you hire a person who has embezzled from a company in the past or if you keep someone on after they’ve embezzled from your business and they do it again, insurance will not cover the loss.
- Errors and mistakes: There is a difference between an accounting error and theft. Crime insurance won’t cover losses that occur as a result of a misplaced decimal or other accounting error.
- Third-party liability: If a third-party suffers as a result of a theft of your business’ money or property and that third party sues you, your crime insurance policy won’t protect you from liability.
- Income loss due to business interruption: You might need to close down your business for a few days after a theft or after discovering fraud or embezzlement. While insurance will help you recover the money lost due to the theft or fraud, it won’t pay you to make up for income lost while your business is closed.
- Run-of-the-mill inventory shortages: Unless you can prove that the inventory shortage is a result of theft, you can’t file an insurance claim if items are missing or if your inventory numbers are slightly off.
Crime Policy vs. Fidelity Bond
Fidelity insurance, sometimes called a fidelity bond, protects your business against loss that can occur as a result of dishonest employees or as a result of the actions of third parties. While crime insurance generally protects your company, a fidelity bond or fidelity insurance is designed to offer peace of mind and protection to your customers. Any business that has employees who handle cash or other assets on a regular basis might benefit from purchasing fidelity insurance in addition to crime insurance. In some areas, you need to purchase a fidelity bond before you can get a license to be in business.
A fidelity bond typically has a cash value assigned to it, such as $50,000 or $500,000. When your business purchases fidelity insurance, it’s sending a message to clients and customers that your business is protected and, in turn, your clients are protected.
Gunn-Mowery Can Help Your Business Purchase the Crime Insurance It Needs
When it comes to crime, it is always better to err on the safe side. Even if you trust your employees and believe that no one would steal from your business, it’s still a good idea to have protection in your pocket in case of a robbery, embezzlement or other forms of theft. Gunn-Mowery has been helping businesses in Central Pennsylvania make smart insurance decisions for more than 30 years. To learn more about the benefits of crime insurance, contact us today.