Employee theft is a serious issue impacting businesses of all sizes, and it’s much more common than many realize. The assumption that employees are inherently trustworthy, while positive, can sometimes lead to devastating blind spots. According to data from JW Surety Bonds, almost 95% of businesses experience some form of employee theft, with many cases going undetected for an average of two years. This staggering statistic underscores a crucial point: no business is immune.

Whether it’s embezzlement, fraud, or simple misappropriation of assets, workplace theft can create severe financial and reputational damage. This is where crime insurance steps in, providing essential protection for your business’s financial health and offering peace of mind for business owners. In this article, we’ll take a closer look at crime insurance policies and highlight five critical coverage types that every business should consider.

Understanding Crime Insurance and “Named Perils” Policies

Unlike other business insurance that might cover a broad range of risks, crime insurance operates on a “named perils” basis. In other words, a crime insurance policy only covers specific causes of loss that are explicitly listed. This structured approach allows business owners to select coverage that aligns with the specific threats their organization faces. However, it’s essential to consider all aspects of your business and confirm that the most pertinent risks—such as fraud, embezzlement, and forgery—are covered in your policy.

The primary types of coverage within a crime insurance policy protect against losses from employee dishonesty, money and securities theft, counterfeit fraud, forgery, funds transfer fraud, and more. Let’s dive into five key components.

1. Employee Dishonesty

Employee dishonesty, often called “employee theft,” is the most frequently utilized coverage under crime insurance policies. This protection applies when an employee steals, misappropriates, or engages in dishonest acts with company assets, including money, securities, or valuable property. While owners and partners are generally not covered, the policy typically extends to full-time and part-time staff, contractors, and even volunteers, depending on the policy’s specifics.

Additionally, businesses that offer retirement or health plans should verify their coverage under the Employee Retirement Income Security Act (ERISA), which safeguards plan assets. If ERISA coverage isn’t automatically included, consider adding the retirement or health plan as an Additional Insured to ensure that employee dishonesty within these areas is also covered.

2. Money and Securities Coverage

Money and securities coverage focuses on protecting against thefts conducted by non-employees. This policy component covers losses that occur either on the business premises or off-site, offering essential protection for events, off-site work, and transportation of funds.

The policy terms specify what constitutes theft “inside the premises” (usually referring to the insured business location) and “outside the premises” (such as during transportation or at off-site events). This type of coverage is especially beneficial for businesses that routinely handle cash transactions or transport valuable securities.

3. Money Orders and Counterfeit Money

As the prevalence of counterfeit currency rises, businesses are increasingly vulnerable to falling prey to fraudulent money orders, counterfeit checks, and fake currency. Coverage for money orders and counterfeit money protects if your business unknowingly accepts counterfeit currency, resulting in financial loss.

With sophisticated scams and fake checks on the rise, reports indicate that counterfeit incidents have increased by 65% over recent years. This trend highlights the importance of having safeguards in place. This coverage is particularly relevant for retail businesses or any organization that handles large volumes of cash transactions.

4. Forgery and Alteration

Forgery and alteration coverage protects businesses from the consequences of altered or forged financial documents. In this type of loss, someone other than an employee manipulates checks, promissory notes, or other financial instruments. Not only does this coverage safeguard against direct losses, but it may also cover legal costs if your business faces lawsuits for refusing to honor a forged check.

This form of coverage is particularly essential for businesses that rely heavily on checks or promissory notes for transactions. Without this safeguard, a single instance of forgery could result in financial loss and legal complications.

5. Fund Transfer Fraud

Fund transfer fraud coverage protects businesses from fraudulent attempts to deplete accounts through unauthorized electronic transfers. As digital transactions become more common, so do incidents of fund transfer fraud. Fraudsters may pose as trusted individuals, such as business owners or high-ranking employees, and manipulate the transfer process through fake emails, calls, or other means.

Fund transfer fraud often involves social engineering, where criminals trick employees into transferring money or providing sensitive information. Given the increasing sophistication of cybercriminals, businesses, regardless of size, are at risk. Funds transfer fraud coverage can help mitigate these risks and provide much-needed security.

What About Computer Fraud?

Computer fraud, an optional addition to many crime insurance policies, extends protection to theft that involves electronically transferred funds or securities. This might include unauthorized fund transfers or “social engineering fraud,” where scammers deceive employees into releasing funds.

As cybercrime continues to evolve, some businesses also invest in comprehensive cyber insurance policies to guard against broader digital threats, including data breaches, hacking, and ransomware. Combining computer fraud coverage with a cyber insurance policy provides a more complete protection plan for companies heavily reliant on digital infrastructure.

Proactive Measures: Enhancing Your Business’s Defense Against Theft

In addition to securing a crime insurance policy, businesses can take proactive measures to reduce their risk exposure. Establishing a strong culture of transparency, accountability, and ethical behavior among employees can significantly deter internal theft. Other effective measures include:

1. Background Checks: Conduct thorough background checks during the hiring process, especially for positions with financial responsibilities. This can help minimize the risk of hiring individuals with a history of fraud or dishonesty.
2. Internal Controls: Implementing internal controls, such as separating financial responsibilities across multiple employees, can make it harder for any single person to commit fraud undetected. Additionally, conducting periodic audits can further deter theft and ensure compliance with internal policies.
3. Employee Training: Educate your employees about fraud risks, including how to spot and report suspicious activities. Training sessions should cover physical security and digital safety, particularly as social engineering attacks become more common.
4. Enhanced Bank Protection: Many banks offer additional fraud prevention measures, such as account monitoring and alerts for suspicious activity. Contact your bank to learn about their fraud prevention services, and consider enabling these safeguards.
5. Anonymous Reporting: Creating a secure, anonymous reporting system for employees to report theft or suspicious activities can encourage people to come forward without fear of retaliation. Anonymous reporting increases transparency and reinforces an organization’s commitment to integrity.

Crime Insurance: An Essential Shield for Financial Security

Ultimately, crime insurance serves as a crucial safety net, protecting your business’s finances from various internal and external threats. With a comprehensive crime insurance policy, you can focus on building and growing your business, knowing that your assets are secure from the risks of theft, forgery, and fraud.

With the Alexander Insurance Agency, you’re securing more than just comprehensive crime insurance—you’re taking proactive steps to protect your business’s finances and reputation. Employee dishonesty and workplace crime are more common than many realize, but with the right coverage and support, you can confidently safeguard your assets and focus on growth. 

Protect your passion and build a safer future! Connect with Alexander Insurance Agency to explore how we can enhance your security and prepare your business for any challenge ahead.