Why You Need Commercial Crime Insurance for Your Business

Commercial crime insurance is essential for protecting your business from employee criminal acts, be it theft from your company or your clients. Even if your business is equipped with excellent security and employee training protocols, there is still a risk of one of your employees committing forgery, embezzlement or some other type of fraud and you’ll want the right type of coverage if it happens.

Learn about how commercial crime insurance works, its limitations and how much it will cost to safeguard your business against certain types of crimes.

Key Takeaways Commercial crime insurance rates average between $650 to $2,500 per year. Forgery, alteration, embezzlement and computer fraud are examples of employee dishonesty that a commercial crime insurance policy may cover. Exclusions may include collateral financial damages, wrongdoing by executives and offenses committed by employees with a known criminal history, among other things. Businesses should focus on money management, property security and employee training to minimize the risks of commercial crime.

What Is Commercial Crime Insurance?

Commercial crime insurance, also known as fidelity insurance, is designed to protect businesses and provide financial reimbursement for criminal acts perpetrated by employees against the company, customers or clients.

For example, say you operate a transportation company and you employ workers who transport inventory for your clients. If one of your drivers is found stealing thousands of dollars worth of inventory from one of your clients, then commercial crime insurance could help cover the cost of replacing the stolen items.

How Does Commercial Crime Insurance Work?

Crime insurance policies usually operate on a named perils basis, covering only specific types of crime such as forgery, fraud and embezzlement. Each loss generally has its own separate limit and deductible, except when multiple acts by the same party are considered a single loss. For example, if the same employee is found stealing from two different clients and you have a $500 deductible, then the $500 deductible would apply for each loss ($1,000 total).

Depending on the policy you choose, your coverage will activate on either a discovery trigger or a loss-sustained trigger. A discovery coverage policy covers losses discovered during the policy period, irrespective of when the crime actually took place. On the other hand, loss-sustained coverage only applies to losses that both occurred and were discovered during the active policy period, although it usually includes an extended discovery period of up to one year for reporting a loss.^[1]

If you opt for a policy with a discovery trigger, be mindful that crimes may take a significant amount of time to detect and could happen over an extended period, making the timing of discovery an important factor. Fraudulent activity can happen over the span of five years or more in some cases.^[2]

What Is First-Party Crime Insurance Coverage?

First-party coverage safeguards the company itself against losses due to employee theft and can be procured through a standalone crime policy, an endorsement to other insurance policies like commercial property insurance or a business owners policy (BOP). An example of this would be an employee who steals $500 from the cash register.

What Is Third-Party Crime Insurance Coverage?

Third-party coverage protects clients against theft by your employees and is commonly offered in the form of a fidelity bond. For example, this type of coverage would activate if an employee were embezzling funds from a client’s investment portfolio. However, keep in mind that fidelity bonds and commercial crime insurance policies are different — the former reimburses the client for their losses, while the latter covers your own business’s own losses.

Do I Need Commercial Crime Insurance?

Commercial crime insurance may be required in certain industries or under specific circumstances. For example, clients of tech companies can stipulate in contracts that a business must have this type of insurance to cover potential employee theft or fraud, offering the client peace of mind.

Furthermore, businesses managing employee benefit plans, like a 401(k), are required by law to specifically have a fidelity bond under ERISA. A commercial crime policy, however, is not legally required.^[3]

What Does Commercial Crime Insurance Cover?

Commercial crime insurance offers financial reimbursement for crime-related losses against your business and clients that are not typically covered by standard commercial property insurance. This specialized insurance includes provisions for:

• Employee dishonesty
• Forgery or alteration
• Embezzlement of money and securities
• Computer fraud
• Offsite robbery of business-owned securities or monies

What Isn’t Covered?

Commercial crime insurance will not cover all types of crimes and any claims for the following will likely be denied coverage:

• Collateral financial damages
• Earnings interruption
• Wrongdoing by company executives or partners
• Monetary penalties and sanctions
• Costs of legal representation
• Damage to property caused by fire
• Offenses committed by employees with a known criminal history
• Repeated infractions by the same staff member

While crime insurance is designed to shield you from monetary setbacks due to criminal activities, there are exceptions that are not covered, often because alternative insurance solutions exist. For instance, cyber liability insurance offers broader coverage against various forms of cybercrime, including the safeguarding of confidential assets like trade secrets, patents and client databases.

How Much Does Commercial Crime Insurance Cost?

The pricing of commercial crime insurance coverage averages between $650 to $2,500 per year.^[4] Price is determined by various risk metrics and the amount of crime coverage required. These risk metrics include the number of employees and whether they work at single or multiple locations, the revenue of the company and the level of office security. Insurers also consider financial controls in place to protect against fraudulent activities and the presence of high-value items like prototypes, which could significantly increase premiums.

For businesses seeking cost-effective options, adding crime coverage to existing policies through endorsements is a possibility, especially for smaller firms. However, standalone policies offer more comprehensive coverage with higher limits, albeit at a higher cost. Fidelity bonds as an alternative to commercial crime insurance typically cost between 0.5% to 2% of the amount of coverage you buy (bond value).^[5]

Who Is Commercial Crime Insurance For?

Those who would benefit from commercial crime insurance include:

Small and medium-sized enterprises (SMEs)	Non-profit organizations
Financial institutions	Retail businesses
Healthcare providers	Service-based industries
Manufacturers and distributors	Schools and educational institutions
Government organizations	High-risk industries

Tips To Prevent Commercial Crime

Crime prevention tips for businesses focus on three main areas: money management, property security and employee training.

For Money

For money management, businesses are advised to make daily bank deposits and change the timing and routes to minimize risks. Daily cash register receipts should be checked against deposits to deter employee dishonesty and checks should be immediately marked for deposit only.

For Property

Regarding property, rear doors should be securely locked from the outside using panic locks, not padlocks. Safes should be used for storing small amounts of cash and valuable items and their combinations should be changed regularly. Security cameras are recommended, especially at entrances and cashier areas.

For Employees

For employees, background checks should be conducted during the hiring process. Training should include safe procedures for opening and closing the business, as well as protocols for robbery situations, emphasizing that employee safety is the top priority. Remember: a crime insurance policy may not extend coverage to an employee you hire who has a known criminal history.

How To Get Commercial Crime Insurance for Your Business

When exploring your options for commercial crime insurance, it's advisable to gather at least three to five estimates from various providers. These insurers will ask for details about your business, such as its industry, location, annual income, workforce size and whether your team operates from a single or multiple locations, as well as the security measures in place at your office. While supplying this data for each company can feel repetitive and time-consuming, there's an easier way.

With an insurance marketplace like SmartFinancial, you can simplify this entire operation. Complete a single questionnaire detailing your insurance requirements and budget and you'll be paired with a tailored commercial insurance policy, sometimes within minutes. To get your FREE insurance quote, simply input your zip code below.