The main reason that businesses buy insurance is that no company is completely immune to risks, no matter how many precautions it takes.
No matter how robust your company’s cybersecurity plan is, you can never be 100% sure that your business’s data won’t be breached and compromised. The same can be said for any type of crime.
No matter how many security cameras you buy or how vigilant your team is about spotting possible financial malversations, someone is eventually going to steal something from you.
That’s why commercial crime insurance should be considered a vital policy for businesses of all sizes, especially small businesses, whose viability could be threatened by one serious and expensive robbery or theft.
Does Your Business Need Commercial Crime Insurance?
There are some other insurance policies (such as commercial property insurance) that can protect your company from some types of crimes. A property policy, specifically, will reimburse your company for the theft of business property.
However, a commercial crime policy is the only solution to consider if you’re really looking for complete and comprehensive coverage against a wide spectrum of criminal acts. Here’s a brief video walkthrough of what such a policy would cover:
As we’ve already stated, crime insurance should be essential for all businesses.
Why? Do your employees have access to money or equipment? Do you keep valuable business items on or off-premise in a safe or vault? Do you have inventory that can be stolen? Do you engage in electronic financial transactions?
If you answered “yes” to any of these questions, your business can and, most likely, will be targeted by criminals, which means that you should seriously consider purchasing a comprehensive crime insurance policy.
Understanding Your Commercial Crime Coverage
Commercial crime coverage can be pretty complex, especially when your business wants to create a comprehensive program that leaves very few gaps in coverage.
Before talking about what types of crimes a commercial crime policy will cover and what typical crime policy claims look like, let’s go over a few terms that business owners commonly ask questions about when looking to purchase a crime policy.
Fidelity Bonds: Business owners are often confused about whether there is a difference between fidelity bonds and crime insurance. The short answer to this question is that fidelity bonds are simply a type of crime insurance that focuses on employee theft. Check out this blog post to learn more about the nuances of fidelity bonds and how they work with crime insurance.
Claim Expenses: Most business owners are aware that a crime policy reimburses them for money and assets that were stolen from the company, but does it cover the cost of claims? Yes, it usually does. However, coverage limits for claim expenses do exist. Obviously, the larger your limit, the more your commercial crime policy will cost. Crime policy claims can get very expensive since they’ll often warrant the services of forensic investigators on top of attorney services.
Discovery vs. Loss Sustained: A commercial crime policy is written either on a loss sustained or discovery basis. But what does this mean? The difference between the two is very similar to the difference between claims-made and occurrence policies in liability claims. A loss-sustained policy works like an occurrence policy. It covers losses that occurred while the policy is in effect, even if the loss was not discovered until after the policy period expired. Discovery basis policies work like claims-made policies. This means that the policy must be active at the time the loss was discovered in order for your coverage to be activated.
Key Exclusions: Before we get into commercial crime insurance claims examples, let’s talk about crimes that a typical crime policy will not cover.
- If the person who committed the crime is the policy owner or a business partner of theirs, this crime will not be covered. If an employee commits a crime while in collusion with one of your business partners, that crime will not be covered either. Even directors & officers policies, which are designed to protect your leadership from claims, will not respond to criminal claims.
- Losses related to accounting errors aren’t covered by a crime policy either. These types of issues would typically be covered by an accountant’s professional liability policy.
- If an employee has a history of stealing from their employer, they will not be covered by your policy if they decide to steal from you. Your policy covers the first act of theft committed by an employee, but if they continue working for you and steal again, this subsequent criminal act will not be covered.
- While crime policies do cover some acts of computer fraud, they don’t cover every type of cybercrime your business could face. Typically, a crime policy will not cover losses related to data breaches or the loss of patents and trade secrets to theft. However, Embroker’s commercial crime policy does cover theft of source code. Still, we recommend that businesses purchase a separate cyber liability policy to make sure that they are fully protected from the multitude of cyberthreats modern businesses face.
- If you have proof (such as a surveillance video) of an employee stealing inventory, that loss will be covered. However, if you discover that inventory has been stolen while examining your financial records but you don’t have hard proof of the crime, the loss will not be covered.
Commercial Crime Insurance Claims Examples
Finally, let’s take a look at some of the most common crime insurance claims examples in order to better understand what your crime policy does cover:
Employee Theft: Employee theft is a very common occurrence in businesses, with more than 75% of employees admitting that they have stolen something from work at least once. Unless your business was aware that the employee had stolen from a business earlier, a crime policy will cover any and all losses related to employee theft.
Third-Party Theft: If someone who isn’t affiliated with your business steals or destroys money or securities located on your business premises, a crime policy will cover these losses. If your building and other business property (locks, safes, cash registers, etc.) were damaged in the act, those losses will also be covered. It’s important to note that a crime policy will only cover money and securities. If you want coverage for the theft and damage of business equipment, you should be looking into commercial property coverage.
Forgery: Theft via forgery or the alteration of documents (checks, promissory notes, etc.) is another common business crime that insurance can cover. For example, an employee could take a check that was made out to you, make it payable to themselves, and deposit the check into their personal account. A properly structured commercial crime policy will cover losses resulting from forgery of documents and theft via forgery within the personal accounts of executives. It also covers forgery claims related to credit, charge, and debit cards.
Computer Fraud: It’s very important to reiterate that a crime policy only covers very specific computer-related risks and that businesses should procure a cyber liability policy to address the majority of online/cyber risks. A crime policy will cover losses resulting from the use of a computer to fraudulently transfer funds from inside the business premise or the insured’s bank to an outside party. This type of funds transfer fraud is basically the only computer-related coverage that a crime policy offers. Even social engineering attacks, which often involve your employees, would be covered by cyber liability, not commercial crime insurance.
Counterfeit Currency: A crime policy will cover counterfeit currency claims. If your business accepted cash, a money order, or a check that looked legitimate but was later proven to be counterfeit, your crime policy will cover these losses.
Robbery: Robbery is often separated from third-party and employee theft in crime policies because it is a specific form of theft that often includes the use of force or threats of force. A crime policy will cover all losses related to a robbery, including building and equipment damage that resulted directly from the robbery. Note: Embroker’s commercial crime policy will even cover support and rehabilitation costs for employees that witnessed the robbery.
Loss of Money Outside Your Premises: Commercial crime insurance also covers the theft, destruction, and damage of money and securities while in transit. If your money or securities are stolen from a messenger service, delivery person, or even an armored car company outside of your premises, these losses will also be covered.
If you’d like to learn more about your business’s specific commercial crime insurance needs, feel free to reach out to one of our expert brokers at any time.
Or if you want to get a quote for our industry-leading digital commercial crime product in just a few minutes, head over to our platform right away.
Learn the three pieces of the fraud triangle, why they lead to employee crime, and what you can do to prevent it. Protect your business today.