Along with all the other miseries this prolonged recession has visited on American businesses add an uptick in employee theft. It takes the form of embezzlement, computer fraud, burglary or robbery of cash or merchandise, shoplifting, forgery and sticky fingers in the cash register. It often goes undetected for years and is thought by some experts to be the main reason one-third of all businesses fail. Any business, large or small, can be a target. And chances are your standard business owners insurance policy won’t cover your losses, or if it does, the coverage limit won’t be sufficient, particularly when you consider that the median annual loss to individual businesses is estimated between $160,000 and $200,000. Commercial Crime Insurance, also known as fidelity insurance, can be an important part of your small business’s risk management strategy.
In addition to covering losses from employee dishonesty, general, commercial crime insurance will also reimburse your company up to the limits of your policy for losses from:
- Forgery and alteration of financial documents
- Computer fraud
- Credit card fraud
- Theft of cash, money orders and securities
- Counterfeit paper money
- Burglary and robbery
- Cash destroyed by fire
Commercial crime coverage comes in two basic types. Discovery commercial crime insurance covers you for losses that are discovered during your policy coverage period, regardless of when they were sustained. Loss-Sustained commercial crime insurance will only reimburse for losses that happen while your policy is in effect and up to a specified period after it expires (usually one year).
As with all insurance coverage, be sure you understand the limits and exclusion in your commercial crime insurance policy. For example, some policies exclude losses caused by your company’s third-party agents, independent contractors, directors and officers since they are not hired employees.
You can help to keep your commercial crime insurance premiums low by taking preventive steps:
- Do background checks on all job applicants
- Avoid keeping large amounts of cash on the premises; make daily deposits
- Don’t let money pile up in cash registers; empty them periodically throughout the day
- Mark all checks “for deposit only” as soon as they are received
- Padlock your dumpsters every night; employees often dump merchandise during the day to retrieve after hours
- Vary the time and route you take when going to the bank
- Train your employees on what to do if a robbery occurs
- Invest in security systems (they can qualify for business insurance discounts)
- Keep your business interior and exterior well-lit during and after business hours
Understand that most employee theft is a crime of opportunity; don’t give your employees an chance to steal