If you want to protect your business from losses associated with employee crime, you’ll have to go outside your
standard commercial property policy.
While the theft of items from your business is usually covered by a commercial property insurance policy, employee
dishonesty and the illicit removal of money or securities isn’t. To insure against these potentially staggering losses,
you need commercial crime insurance.
Commercial crime coverage is a broad term referring to insurance or bonds that protect companies against dishonest
employee actions, computer or funds transfer fraud, forgery or alteration, theft or destruction of money and
securities, and employee theft of client property.
Computer fraud is a growing problem
The computer fraud angle is particularly important for small and midsize companies today because criminals are
heavily targeting this sector with phishing emails. These so-called social engineering efforts include impersonation of
financial managers and other attempts to fool employees into transferring funds to unauthorized persons. Financial
losses stemming from these attacks are not covered by standard commercial property insurance.
Commercial crime policy vs. fidelity bond
Though the terms “commercial crime policy” and “fidelity bond” are used interchangeably, there may be important
differences. A commercial crime policy can help if your funds are stolen by someone outside of your company, to
include an embezzler, a burglar, a hacker, or a counterfeiter who passes your company bogus currency.
Fidelity bonds focus primarily on your employees. There are multiple types of fidelity bonds that make up commercial
crime coverage, and some depend on the type of business you run. For example, financial institutions should obtain
bonds specially designed for the banking or investment sector.
Non-financial sector companies might be interested in a business services fidelity bond, which insures against
employee theft of customer property. A company that has employees who go to client work sites or handle client
assets would most likely be well served by a fidelity bond that covers those workers. Imagine a case where a home
therapist is accused of stealing jewelry or an accountant is charged with embezzling client funds.
If your employees stay on your business premises, you might want an employee dishonesty bond, which covers
internal employee malfeasance.
Fidelity bonds can be written to cover all your employees (called blanket coverage) or just those few with access to
your financial accounts. Talk to your insurance professional about the number of personnel you wish to cover,
because this is an issue that will affect your cost. It might not be necessary to cover all – or even many – employees.
Note that owners, partners, directors and officers of a company are generally prohibited from being insured under a
A fidelity bond is normally written to cover a set of named perils, such as those mentioned above: embezzlement,
forgery, etc. You will typically be given a choice of how your coverage is triggered: when the loss is discovered or
when the loss is sustained. Your policy must be in force at the time of the discovery (or the actual occurrence of loss
in the latter case) for coverage to apply.
When to report a loss
Understanding the term “discovery” is important. You don’t need to have all the facts or be able to prove a crime to
trigger your coverage. If you become aware of facts that reasonably suggest a loss has happened, that is the time to
report it. If legal action is taken against your company or a named insured for actions included in your policy, that is
also a trigger for coverage, so you should report it. If you delay and further crimes are committed, you could forfeit
Keep in mind that a conviction is usually necessary to validate a claim against a crime bond. Without that, the loss
might not be covered since the perpetrator won’t have been proven to be a person insured by the bond or policy.
Under a commercial crime policy, you may be able to secure coverage to help pay for forensic experts who can build a
body of proof supporting the loss you are claiming. That is a very beneficial component of a policy.
How do you get commercial crime insurance?
Your company can purchase commercial crime insurance or fidelity bonds as stand-alone products or as an addition
to a commercial insurance package. Some business owners policies (BOPs) include some crime insurance, while others
allow you to add crime as a tailored option.
Your insurance professional will help you decide which insurer or surety (the company that provides fidelity bonds)
can best meet your particular needs. That agent or broker will also help you secure the right product from a reliable
You will need to consider how a new policy will dovetail with your other commercial coverages. For instance, you may
also need an ERISA bond or a fiduciary bond. These protect your company against failures in benefits administration
or the handling of financial accounts. You will also want to see how much coverage your commercial property
insurance provides for lost, stolen or destroyed financial instruments, such as cash, checks or other securities. It is
usually minimal, so building that protection out may be advisable.
In the end, success at protecting your assets will depend on a combination of high-quality insurance and robust
monitoring of your financial accounts. While not every crime can be prevented, great employee training to avoid
external theft and excellent custody protocols to avoid internal dishonesty will go a long way in keeping your
company free from crime losses.