Crime insurance protects businesses and other establishments from financial loss resulting from criminal activity. Most crime insurance claims are filed due to employee fraud, forgery, embezzlement, dishonesty, robbery, computer fraud, counterfeiting, and other illegal acts. Such crimes can be committed in almost any corporate environment and individuals who participate in these types of crimes have been known to take every possible angle in order to accomplish their goals.
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Those who become career criminals within the business world are typically very adept at taking advantage of weak links within the company where they are employed. From creating fictitious employees to which checks are written, to the billing of non-existent suppliers, embezzlement and fraud in the workplace is on the rise.
Various Levels of Risk
Every business owner is exposed to some type of financial risk due to the aforementioned crimes, and while individual risk levels vary from company to company, no business owner is immune to such crime. Certain losses, especially those that are the result of an employee’s criminal conduct, may not be covered under a standard commercial liability policy; however, a crime insurance policy usually covers such loss.
Coverage Provided by Crime Insurance
Liabilities covered by crime insurance typically fall into one of two specific categories, although policies can be purchased that are a combination of both types of coverage:
1. Money and security coverage
Reimburses the policy owner for financial loss resulting from burglary, robbery, or destruction.
2. Employee dishonesty coverage
Provides reimbursement to the policy owner for money or securities lost through the dishonest act of an employee.
Specific examples of such loss may include the following, depending on the terms and conditions of the business owner’s policy:
• Criminal acts or acts of dishonesty committed by employees
• Document or signature forgery.
• Employee theft
• Funds transfer fraud
• Credit card fraud
• Counterfeit currency and money order fraud
• Coverage for the cost of investigation for loss
Optional Client Coverage
A business owner can also choose to purchase additional insurance for his or her clients should they become a victim of an employee’s fraudulent act. Company owners that opt for this type of additional coverage are typically those that offer goods or services for which customers must give credit card information to one of the company’s employees.
Understanding Different Types of Insurance
Unlike a burglary policy, which covers only loss resulting from forced entry, crime insurance covers all types of robbery and theft, regardless of their location and nature. For instance, if an employee of a store forgets to secure the premises before leaving and the following day there are items missing, burglary insurance would not cover the loss because there would be no sign of forced entry. However, crime insurance would cover such theft, regardless of the circumstances under which it occurred.
Crime insurance also provides protection in the event of a loss that is not monetary in nature, but could result in liability issues for the company.
Criminal acts committed by the insured that result in direct or indirect loss to the company are not covered under crime insurance. In addition, losses resulting from war, acts of war, and property destruction that occurs due to acts of nature are usually excluded from crime insurance policies as well. This scenario may include vital business or personal information stored on a computer that was subsequently stolen from the company.
While no one can tell another person what type of insurance he or she should acquire, many business owners feel that investing in crime insurance is a wise step. A business owner’s risk of catastrophic financial loss due to fraud or embezzlement in the workplace is typically what motivates him or her to purchase the aforementioned coverage.
Recent publications in several business periodicals state that workplace crime is on the rise, and occurs in even the most prestigious companies. According to statistics:
• 80 percent of criminal activity in the workplace crime is committed by permanent employees
• 25 percent of employees have either witnessed or committed workplace abuse or fraud
• Many workers who commit fraud against an employer have been with their company over ten years
• Only a third of those who have witnessed workplace crime report the activity to a person in authority
Fraud in the Workplace–A Billion Dollar Enterprise
The Association of Certified Fraud Examiners states that abuse and fraud in the workplace costs American businesses over 400 billion dollars each year, or approximately 9 dollars a day per employee. The average business establishment loses six percent of its total yearly revenue to crimes that are committed by its own employees.
Such fraud within a company sometimes goes on for years before the guilty person’s activity is discovered. Small companies are particularly vulnerable to such crimes and sometimes find it difficult or even impossible to keep their doors open after such an event, depending on the severity of the crime and the amount of the financial loss. According to the American Management Association, employee crime and dishonesty causes as much as 20 percent of the United States’ business failures.
The Importance of Comparison Shopping
When the decision has been made to invest in crime insurance, care must be taken to select the right company and agent. Too often, business owners fail to comparison shop and instead sign up with the first agency they find. It is much wiser to compare several agencies and prices, and consider the pros and cons of each one before making a final selection.
Fierce competition exists in the insurance field, and though all companies state they are the “best,” business owners need to research and compare free online quotes from many different companies before purchasing a policy. This method of comparison shopping will result in finding the right coverage at an affordable price.