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As a business owner, the safety of your business is a top priority. That’s why it’s important to make sure you’re protected against the financial losses that crime such as theft, burglary, robbery, forgery, and fraud can wreak on your business. Even the most cautious and prepared businesses can find themselves victims of a crime. And while there is the risk of external bad actors at play, more often than not, employee dishonesty and theft is the cause of greatest concern for small businesses.
Table of Contents
- What is Commercial Crime Insurance?
- Do I need Commercial Crime Insurance?
- What does Commercial Crime Insurance cover?
- What are the key exclusions to Commercial Crime Insurance?
- Discovery vs. Loss Sustained Basis
Commercial Crime Insurance provides protection from financial losses related to crimes such as theft, burglary, robbery, forgery, and fraud. While most commercial property insurance policies do not cover losses from crimes committed by employees and offer limited coverage for losses from crimes committed by other third parties, Commercial Crime Insurance can provide the protection your business needs from crime-related losses.
- You own a car audio store, selling and installing audio equipment for automobiles. Your store was recently robbed, and $50,000 worth of equipment was stolen. The police find that the robbery was an inside job, led by a long-time employee of yours. While commercial property insurance would exclude coverage for this incident, Commercial Crime Insurance would provide coverage for the stolen goods.
Commercial Crime Insurance can cover your property, merchandise, cash, and securities against theft, embezzlement, or forgery by employees. It can also protect you from non-employee third parties who commit forgery, theft, robbery, burglary, or fraud. This type of insurance can be purchased on a standalone basis or as a part of a commercial package policy.
While no business wants to believe that they’ll be the victim of theft or fraud, the reality is that no business is truly safe from this risk. While some commercial insurance policies may provide minimal coverage for certain criminal acts, Commercial Crime Insurance provides comprehensive protection against a wide variety of crimes. Consider a Commercial Crime policy if any of the following apply to your business:
- You have employees who have access to valuable equipment, goods, or cash.
- You hold inventory or stock that may be susceptible to theft.
- You engage in cash, credit, or electronic transactions or money transfers.
- You store valuable items in a safe or vault on your business premises.
- You transfer valuable items outside of your business premises.
- You have invested in a security system.
Commercial Crime Insurance generally includes coverage for the following items:
- Employee dishonesty. Any loss or damage to money, securities, or other property caused by employee theft or forgery. If a business is aware that an employee has previously stolen from the business, losses caused by that employee may not be covered.
- Forgery or alteration. If checks, promissory notes, or other promises to pay money are drawn on your account and forged by someone other than your employee, Commercial Crime Insurance will cover the losses. This insurance also will provide payment for legal fees to defend against lawsuits if you are sued for refusing to pay for a forged check or promissory note.
- Theft of money or securities from inside the premises. This covers the loss of money or securities from theft, disappearance, or destruction when the money or securities are located on your business premises. It also covers damage to the building or premises, as well as damage to any locked safe, vault, or cash register resulting from actual or attempted theft. This coverage is for non-employee thefts. Note that this coverage does not cover property other than money and securities if it is stolen by a non-employee.
- Robbery or safe burglary of other property inside the premises. Robbery is a more specific form of theft which is the taking of property by force or under the threat of force. Safe burglary is the taking of property from inside of a locked safe. This covers the loss of other property (not including money or securities) from your business premises via robbery or safe burglary by non-employees. It also covers damage to the building, premises, or locked safe that occurs during a robbery or safe burglary. Note that this coverage excludes nonviolent shoplifting from retail stores.
- Loss of money or securities outside the premises. This covers theft, damage, or destruction of money, securities, or other property while outside your business premises and in the care of a messenger or armored car company. This mainly refers to property that is in transit.
- Computer fraud. Losses or damage from the fraudulent transfer of your money, securities, or other property to a place outside your business premises or bank resulting from the use of any computer.
- Funds transfer fraud. Losses resulting from fraudulent instructions provided to a financial institution that leads them to transfer funds out of your account.
- Money orders and counterfeit money. Losses resulting from counterfeit money orders or counterfeit money that your business has accepted.
Additional coverages are also available for an extra premium, such as:
- Property of clients. This covers the theft by one of your employees of the money, securities, or other property belonging to your clients. This coverage can be useful if your employees work at client sites. If one of your employees is accused of stealing from a client while performing work for your business, your business can be covered for this loss.
- Extortion and kidnapping. If a criminal kidnaps and threatens to injure or kill a director, manager, employee, or partner of a business, this coverage will cover the ransom required by the extortionist. It will also cover ransoms due to extortionists who threaten to harm your business premises or property. Kidnap and ransom insurance is also available as a standalone policy.
Commercial Crime Insurance does not cover the following:
- Crimes, theft, or other actions that you or your business partners commit. It also does not cover actions committed by employees in collusion with any of your partners. Actions by top management may also be excluded.
- Liabilities you may incur to third-parties due to crime-related losses.
- Accounting errors.
- Loss of income due to stolen property or business interruptions from crime.
- Employees who have been caught stealing in the past by an employer are excluded. Once you have discovered that an employee has stolen something, any later thefts they commit will not be covered.
- Any loss resulting from data breaches or the loss of patents, trade secrets or customer lists are not covered.
- Legal fees, except for those related to forgery lawsuits.
- Inventory shortages if they are discovered through a physical inventory count or while reconciling financial statements. However, if there is other evidence showing the cause of the inventory shortage, such as surveillance video of an employee stealing, the loss may be covered.
- Losses from trading and investment decisions in financial accounts are not covered. The indirect loss of income from stolen money or securities that could have been invested is also excluded.
- Warehouse receipts, which prove ownership of commodities, such as copper, stored in a warehouse. Fraud involving warehouse receipts are not covered.
Examples of Commercial Crime Insurance Claims
Your retail business has a cash register for making cash transactions with customers. One night, the employee who is closing for the night steals $1,000 from the cash drawer. A Commercial Crime policy would cover your business for the lost cash.
Your business accepts check payments from customers. An employee in your accounts receivable department alters some checks you receive from customers and makes them payable to himself. The employee deposits the check in his own account. Your Commercial Crime policy would cover your losses from this theft.
Employee Theft from a Client (Optional Coverage)
Your business provides painting services to clients at their business premises. One of your customers has a laptop stolen from their office the day your employees were painting. Due to the painting, no other people were in the office that day. If you elect to cover employee theft from a client, this loss will be covered by your insurance policy.
Commercial Crime Insurance is written on either a loss sustained basis or a discovery basis. A loss sustained policy is similar to an occurrence policy in liability policies. This kind of policy will cover any loss that occurs while the policy is in effect, even if the loss is not discovered and claimed until after the policy period has ended.
A discovery basis policy is similar to a claims-made liability policy. In this type of policy, the policy must be active at the time a loss is discovered. After a policy expires or ends, there is no longer coverage for losses that occurred while the policy was active. Many discovery policies include a 60-day period to discover loss. This discovery period allows you to report claims for up to 60 days after a policy ends for losses that occurred during the active policy period.
No matter how many precautions you take, no business is immune to crime. If your business has employees, deals in cash or credit transactions, or stores product inventory, a Commercial Crime policy may be a wise coverage to purchase. When it comes to protecting your business against financial losses due to crimes such as theft, burglary, employee dishonesty, forgery, and fraud, Commercial Crime Insurance can provide the financial backing you need to be able to recover from any unexpected crime. For many smaller businesses, a serious theft or robbery could be a substantial setback and threaten the viability of the business. All business owners should make sure to invest the right resources in protecting against crime, from safety protocols to security systems to the right insurance coverage.