The Basics of Commercial Crime Insurance
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Commercial crime insurance—also referred to as business crime insurance—is designed to protect your business from crime-related losses such as fraud, forgery, embezzlement, robbery/theft, and other crimes. Most businesses can purchase this insurance as part of a package, often referred to as special multi-peril insurance. It is also offered as a stand-alone policy.
According to the 32nd Annual Retail Theft Survey conducted by Jack L. Hayes International, “Over 348,000 shoplifters and dishonest employees were apprehended in 2019 by just 21 large retailers who recovered over $136 million from these thieves.”
According to an Embezzlement study done by Hiscox in 2018, the average loss from employee embezzlement was $357,650. More than half of the companies impacted only recovered about ⅓ of the embezzled money. Even worse, these businesses lost customers, business partners, and suffered damage to their reputations.
The Association of Certified Fraud Examiners 2020 Report to the Nations covered 125 countries and over 2,500 cases in their report. They reported more than $3.6 billion in losses due to fraud alone between January 2018 and September 2019
While you don’t expect to be robbed or for an employee to steal from your business, it happens every single day. Small businesses aren’t immune to theft, which is why you need to make sure you’re protecting your business with the proper commercial crime coverage.
Crime insurance provides coverage for employee dishonesty coverage, forgery or alteration coverage, theft of property, theft of money and securities, burglary/robbery, computer fraud, and some will include extortion and kidnapping.
Employee Dishonesty Coverage is the core of commercial crime insurance. It protects small businesses (employees, managers, partners, directors) from loss of money due to acts of employee dishonesty (employee theft, fraud, forgery, etc). People often use it interchangeably with crime insurance, however, business crime insurance is usually more comprehensive.
Example: An employee at your local deli has been skimming money off of your cash register during their shift. They weren’t caught until you implemented security cameras behind the counter. Dishonesty coverage paid for the costs associated with the theft.
This portion of the policy covers financial losses sustained by forged or altered checks, usually done by an employee or business partner. Some small business policies cover between $2,500–$10,000 in losses.
Example: One of your employees routinely runs checks made out to the business to the bank. However, they alter an occasional check so it’s deposited into their account. Your bookkeeper finds the discrepancy and reports it. The responsible person is fired and your insurance company helps you recoup your losses.
This part of your crime policy covers monetary and securities losses within or outside of your business.
Example: Your business account isn’t lining up with your accounting. After an investigation, it’s found that someone had gained access to your account and was routing money to their account.
The robbery and burglary portion of your coverage protects you and your employees if your small business is robbed under the threat of force. It can also cover any damage to your business premises or property associated with the robbery (that is excluded by your commercial property insurance).
Example: Your convenience store is held at gunpoint and the gunmen empty your cash registers. Luckily, your employees aren’t harmed. But your business insurance will cover replacing the damaged doors and windows and replace the loss up to the limits of your policy.
Your business is protected from computer fraud due to phishing, ransomware, and any other losses involving a computer. This can include money transfers perpetrated from fraud including funds fradulent transfer and money orders fraud.
Example: Your work hard to properly train your staff to recognize phishing emails. However, your bookkeeper is duped by a realistic email requesting a wire transfer payment. She later finds out that it was spam and is distraught. But luckily your crime policy will cover the loss.
Kidnapping and extortion of small and medium-sized businesses aren't common. However, this can be added as an endorsement to most commercial crime insurance policies. If business owners, partner, manager, or other employee is kidnapped and you’re extorted for money, this policy can cover the cost of the ransom.
Example: The manager of your local grocery is kidnapped, and the kidnappers demand a ransom of $25,000. Your insurance policy can help cover the ransom and negotiate the safe return of your employee.
What isn’t covered by a business crime insurance policy? It doesn’t cover any actions perpetrated by you or business partners. It also doesn’t cover:
Crime insurance also excludes coverage if employee theft occurs by someone who was previously found guilty of stealing from you in the past.
What are some ways you can prevent crime in your business? Here are some helpful risk management tips:
The pricing of commercial crime insurance depends on different variables, including:
Do you have questions about a commercial crime package? Do you need tips to help provide protection for your business? We will gladly help answer any questions you may have. If you’d like a free quote, complete the form at the top of the page or call us at 877-907-5267.
Related Insurance Policies: Commercial Property Insurance | Employment Practices Liability Insurance | Kidnap and Ransom Insurance | Commercial Property & Casualty Insurance