You may think your business has enough insurance already. What’s a common business insurance coverage oversight? If you business is vulnerable to employee theft and fraud — and most businesses are — you may want to consider adding more coverage. Some insurance companies offer policies to protect against loss of money and property due to criminal acts by employees. Here’s how to decide whether your business needs one.

Specialty coverage

Employee dishonesty insurance can cover not only theft of money, property and securities, but also willful damage to property. If, for example, an employee smashes a computer or kicks a hole in a wall, it’s likely covered. And this type of policy covers losses from all employees. However, coverage generally is based on occurrences. So if more than one employee is involved in a single theft, the payout will be based on that single occurrence.

Rates and deductibles typically depend on a business’s level of risk. But separate employee dishonesty insurance policies are likely to have higher loss limits and more customized coverage than is available with coverage offered as part of a business insurance package.

Policy limitations

Employee dishonesty insurance covers only property your business owns, holds for others or is legally liable for. It usually doesn’t cover theft or damages caused by employees of businesses that provide services to your company. (For coverage related to third parties, such as contract workers, you may need to add “endorsements” or buy a broader business crime policy.)

Employee dishonesty insurance also generally won’t cover loss of:

• Intangible assets such as trade secrets or electronic data,
• Loss of employees’ property,
• Damage covered by another insurance policy, or
• The unexplained disappearance of property.

The burden of proof for employee dishonesty claims is solely on the policy owner. Insurance companies will pay claims only if there is conclusive proof that an employee caused the loss.

Finally, employee dishonesty insurance isn’t a substitute for a fidelity bond if a bond is required by a funding source or other contractual agreement. And such bonds can offer advantages. For example, Federal Bonding Program bonds, intended to encourage employers to hire hard-to-place applicants, reimburse employers with no deductible for loss due to employee theft.

Consider your options

Now that you know that employee dishonesty insurance is a common business insurance coverage oversight, look closely at what your general liability or business owner’s policy covers so that you don’t pay for the same coverage twice. And keep in mind that some businesses — such as restaurants and retail stores, where employees often handle cash — may benefit from it more than others.

(This is Blog Post #754)