Employee Dishonesty Coverage Protects Your Business From Employee Theft And Fraud


According to statistics from the Association of Certified Fraud Examiners, losses due to employee dishonesty can range from hundreds of thousands to millions of dollars a year. A typical business might lose up to 5 percent of its revenue to fraud each year. As the proliferation of new technologies that help all of us 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. There is no way to completely prevent a theft. Small businesses are particularly vulnerable to crimes such as fraud or embezzlement committed by their employees. In a small business, frequently the owner is covering multiple duties or the profit margins are thin, thus making even a small cash theft cause a severe impact on business operations.

Employee dishonesty coverage—or fidelity and crime coverage—is one way to help protect your businesses from employee theft or dishonesty. Employee dishonesty insurance is sometimes also referred to as a fidelity bond. It protects the business owner from financial losses that result from fraudulent acts committed by a single employee or a group of employees. You may feel like your employees would never commit crimes against you, but employees are in a position to know enough about your business practices to know how to steal so that it is less likely to be detected. A great employee can be your most valuable business asset, but an employee who steals could be your greatest liability.

Employee crime coverage protects the business owner and is extended to any parties named in the policy—typically all current and former employees, partners, members, directors, volunteers, trustees, and seasonal or temporary employees. A basic stand-alone employee dishonesty 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, such as third party coverage. Third party coverage can be added to protect certain named clients from damage or loss to property, money, or securities leased or owned by the client from theft by your employees. It includes coverage for theft or crimes taking place at the client’s premises as well as at your place of business. This is a valuable coverage to consider adding if you have a significant portion of your revenue coming from just a handful of large clients.

Like many other types of business insurance coverage, employee dishonesty coverage limits vary by the types of exposures that you face and your specific needs. For instance, if you handle a lot of cash and securities, you may have a greater need for coverage. Limits usually start at $100,000. You can purchase employee dishonesty coverage as a stand-alone policy or as an add-on or endorsement to other business insurance packages. Often add-on policies do not have sufficient coverage limits and are limited to first-party coverage only. Stand-alone policies are often needed for those with more extensive exposures.

Employee crime insurance typically excludes coverage for accounting or math errors or omissions, vandalism, government seizure or destruction of business property, restatement of a profit and loss statement, theft by the policyholder, and loss of income related to a covered employee crime.

If you are a business owner with even a small number of employees, employee dishonesty coverage is necessary to protect your business. Have you ever been the victim of employee theft or fraud? Tell us about your experience.

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