Almost every business needs crime insurance. While it's important to have the right coverage to protect against crimes committed by outsiders, it's also important to have the right coverage to protect against crimes committed by employees.
Most commercial property policies written on a "Special," or all-risk basis, cover theft of business personal property perpetrated by others outside of the business organization. They do not, however, cover theft of money, securities, or business personal property perpetrated by employees or officers of the business. Coverage for this exposure can be added to a package policy or through the purchase of a separate Crime policy.
Theft by Employees
Embezzlement occurs when you entrust an employee with your business assets and the employee steals the property. There's no simple way to prevent embezzlement because some degree of trust between employers and employees is required in every business. Fortunately, this type of loss would be covered by an employee theft policy. This is probably the single-most important type of crime coverage.
In addition to the protections from theft of money, securities, and business personal property, employee benefit plans can be covered. The Employee Retirement Income Security Act (ERISA) requires an amount of insurance equal to 10% of the funds handled, subject to a minimum of $1,000 and a maximum of $500,000. This can include not only 401(K), profit sharing, and pension plans, but also medical, dental, vision, life, and disability insurance plans. ERISA requires that those who handle funds of employee welfare or benefit plans (subject to its provisions) be bonded. The employee theft policy can be used to satisfy these ERISA requirements. Each of the benefit plans must be named as an insured to activate the coverage.
If You Suspect Theft
Contact the police or a professional security consultant for help. Don't try to solve the crime yourself; you could hinder the investigation. You could also risk exposing your company, your co-workers, and yourself to liability or serious danger. Cooperate with the authorities, and keep your insurance carrier informed. Remember, your carrier will need absolute proof of the theft and amount lost to help you recover your losses.
If employee theft is proven, always prosecute. Don't settle for restitution and an apology; it doesn't deter future theft. If you treat employees fairly, those who are honest will understand prosecution is a tough but deserving consequence of dishonest behavior.
If you'd like to add employee theft coverage to your business policy, contact your agent or broker for more information or to obtain a quote. Your agent should be able to help you select the suggested minimum amount of insurance your business needs.
This article is intended for general educational and illustrative purposes only and should not be construed to communicate legal or professional advice. Further, this article is not an offer to sell insurance. Please consult with your licensed insurance agent for specific coverage details and your insurance eligibility. All policies are subject to the terms, conditions, limitations, definitions, and exclusions contained therein.
