A typical business might lose up to 5 % of its revenue to fraud each year, while losses due to employee dishonesty can range from hundreds of thousands to millions of dollars, according to statistics from the Association of Certified Fraud Examiners. And with the proliferation of new technologies that help all of us to work faster and smarter, the fraudsters are faster and smarter too!
All businesses are susceptible to employee theft and fraud. Even with background checks and other means of ensuring a quality workforce, you can never be 100% sure that you are safe. Small businesses are particularly vulnerable to crimes such as fraud or embezzlement committed by their employees. Even a small cash theft can negatively impact your bottom line.
Commercial crime coverage can protect your businesses from the costs of theft, dishonesty, and fraudulent acts committed by an individual employee or a group of employees.
What Is Commercial Crime Insurance?
Commercial crime insurance protects your business from financial losses related to crimes such as theft, burglary, robbery, forgery, and fraud. It’s a necessary part of your business insurance portfolio, because most commercial property insurance policies do not cover losses from crimes committed by employees, and typically only include limited coverage for crimes committed by third parties.
Commercial crime insurance is important for many small- to medium-sized businesses, especially those with limited resources to spend on extensive security systems. And those that handle cash, checks, credit cards, and online payments are particularly vulnerable to a variety of crimes.
You should also consider commercial crime insurance if you have part-time employees, have inventory or products that can be easily carried off of your premises, or you allow employees to access financial records or customer data.
If your business has any of these characteristics, it’s a good idea to work with an independent insurance agent to assess your need for this very important coverage.
About Commercial Crime Insurance Policies
Commercial crime insurance can be written as a separate stand-alone policy or as an endorsement on other business insurance policies that you have.
A basic stand-alone commercial crime insurance policy provides coverage for forgery, alteration, theft, unauthorized electronic funds transfers, credit card fraud, computer fraud, money order fraud, and counterfeit fraud. You can also add endorsements for additional coverage.
A stand-alone policy is advantageous because it allows you to customize your coverage for you unique business and risk exposures.
Some business owners find it easier to include commercial crime coverage within a comprehensive commercial package policy. Just remember that crime coverage isn’t automatically included in a commercial package policy. It must be specifically included.
What Does Commercial Crime Insurance Cover?
Commercial crime insurance typically covers loss of property, merchandise, cash, and securities due to theft, embezzlement, or forgery by employees. It can also protect you from outside parties who commit forgery, theft, robbery, burglary, or fraud.
Commercial crime insurance typically provides broad coverage for a wide variety of crime losses, including those related to the following types of crimes committed by employees or outside third parties:
- Employee dishonesty
- Forgery or alteration
- Theft of money or securities from inside the premises
- Robbery or burglary of other property inside the premises
- Loss of money or securities outside the premises
- Computer fraud
- Funds transfer fraud
- Counterfeit money orders and counterfeit money
You may also be able to pay extra for coverage for:
- Property of clients
- Extortion and kidnapping
What Is Not Covered by Commercial Crime Insurance?
Like any other business insurance policy, commercial crime insurance does not cover everything. Here are some typical exclusions from crime insurance coverage:
- Crimes committed by you or your business partners, or crimes committed by employees in collusion with any of your partners
- Liability claims that arise from crime-related losses
- Accounting errors
- Loss of income due to stolen property, or business interruptions due to crime
- Theft committed by employees who are known to have stolen from you in the past
- Any loss resulting from a data breach, or the loss of patents, trade secrets, or customer lists
- Legal fees, except for those related to forgery lawsuits
- Inventory shortages that are are discovered through a physical inventory count or while reconciling financial statements
- Losses from trading and investment decisions in financial accounts
Examples of Commercial Crime Insurance Claims
Because there are so many ways in which your business can be a victim of crime, it might be hard to understand when your commercial crime insurance will or will not offer protection.
Here are a few examples of typical crime insurance claims:
- Employee theft: An employee steals cash from the cash drawer. Your commercial crime coverage covers the loss of cash.
- Employee forgery: An employee alters checks received by a customer and makes them payable to herself, and deposits the checks into her own bank account. The commercial crime policy would cover the lost funds related to the employee forgery.
Other typical crime claims include:
- Petty thefts, robbery, or burglary
- Fraudulent deals with employees, contractors, suppliers, and part-timers
- Computer hacking to steal funds, property, or securities
What Insurance Companies Offer Commercial Crime Insurance?
Most major insurance companies offer commercial crime insurance for their commercial insurance customers.
It’s important to work with an independent insurance agent who isn’t tied down to one company. Independent agents can offer access to most insurance companies, allowing them to secure multiple quotes and letting you make an informed decision.