Business rime insurance, also referred to as commercial crime insurance, is a specialized insurance product designed to shield businesses from financial losses resulting from criminal activities within their operations.
This insurance policy offers protection for various assets, such as cash, merchandise, and property, in the event of fraud, embezzlement, forgery, theft, or other business-related crimes committed against the company. By investing in business crime insurance, businesses can mitigate the impact of illicit activities and safeguard their financial well-being.
It is important to note that business crime insurance must be obtained separately, as standard commercial property insurance typically does not cover losses stemming from business crimes. Businesses that handle cash transactions or operate in the realm of online payments are particularly vulnerable to such criminal activities, making business crime insurance a crucial risk management tool for these sectors.
This specialized insurance coverage ensures that businesses are protected against financial losses arising from criminal acts, providing a safety net in the face of potential threats to their assets and operations’
How Business Crime Insurance Works
The functionality of business crime insurance stems from the fact that standard commercial property or business policies typically exclude coverage for losses related to criminal activities.
Businesses have the option to acquire business crime insurance either as part of a comprehensive industrial package policy, known as “special multi-peril insurance,” which combines various coverages like crime, property, liability, and other potential loss scenarios into a single package for comprehensive protection.
Alternatively, businesses can opt to purchase business crime insurance as a standalone policy to supplement existing insurance coverage. This standalone approach allows companies to customize the policy to address specific types of crimes they are most vulnerable to, tailoring the coverage to their unique risk profile.
It is crucial for businesses to understand that business crime insurance is not automatically included in standard commercial business package policies unless explicitly added.
Instances where a business may benefit from a business crime insurance payout include scenarios such as employee theft from a cash register, embezzlement through electronic payment systems, robbery resulting in merchandise loss, forged checks or unauthorized payment losses, unaccounted inventory disappearance during peak hours, and similar situations involving criminal activities impacting the business’s financial well-being.
Types of Business Crime Insurance Coverage
Commercial crime insurance typically encompasses various coverages to address different scenarios, including employee theft, forgery, computer fraud, and more. Below are some of the common coverages provided.
• Employee theft
Employee theft or employee dishonesty coverage includes protection against losses resulting from employee theft. While this insurance may cover crimes committed by external parties, a key aspect is safeguarding against losses caused by employees, filling a gap often excluded in commercial property policies and BOPs.
• Forgery or alteration
Forgery or alteration insurance offers coverage for losses arising from the forgery or alteration of checks, drafts, or promissory notes issued by you or on your behalf. For instance, if a check intended for a vendor is altered to a higher amount, resulting in financial losses, this insurance would provide coverage.
• Theft of money and securities inside your premises
This coverage protects against theft of cash or securities from your premises or a bank’s business location. It includes compensation for stolen assets and damage to premises or secure containers caused by theft.
• Robbery or safe burglary inside your premises
Robbery and safe burglary insurance covers property loss or damage, excluding money or securities, due to criminal acts like theft or forced entry. This coverage extends to incidents where valuables are stolen through robbery or safe burglary within your premises.
• Theft of property outside your premises
Business crime insurance may include coverage for the loss of money and securities outside your business premises under specific conditions, such as when in the custody of a company messenger or armored car service and subsequently stolen or lost.
• Computer fraud
Coverage for computer fraud protects against losses resulting from fraudulent activities using computers to transfer funds or property from your company’s premises or bank accounts to external entities. This insurance safeguards against scenarios like unauthorized transfers orchestrated through computer systems.
• Funds transfer fraud
Fund transfer fraud insurance addresses situations where scammers deceive as representatives of your organization to obtain money fraudulently. This coverage is crucial for protecting against fraudulent fund transfers initiated by impersonators posing as authorized personnel within your company.
What Business Crime Insurance Does Not Cover?
In general, business crime insurance does not extend coverage to financial institutions like banks. Additionally, it excludes crimes committed by business partners or company executives, even if they involve an employee. If a business knowingly hires an individual with a criminal record who later engages in theft, these losses are typically not covered.
The policy also excludes losses from employees committing multiple offenses after an initial one.
While business crime insurance addresses some digital crimes, such as fraudulent hacking, it does not safeguard against data breaches where sensitive client information is stolen. Cyber liability insurance is necessary for coverage in such cybercrime scenarios.
Other exclusions under business crime insurance encompass unverifiable thefts, legal expenses to third parties, loss of income, theft of intellectual property or trade secrets, theft of business property beyond money and securities, and damage to buildings and equipment unless resulting from covered robberies.
Who Needs Business Crime Insurance?
Businesses of various sizes that employ staff or volunteers may find business crime insurance valuable. This coverage is particularly advantageous for businesses with a significant number of part-time employees or experiencing frequent turnover.
Moreover, businesses heavily involved in cash transactions (excluding credit unions and banks), reliant on electronic transfers, managing product inventories, or utilizing costly office equipment can greatly benefit from having business crime insurance in place.
Purchasing Commercial Crime Insurance
Commercial crime Insurance can be acquired from insurance providers that offer commercial property and various business insurance products. Certain insurers may provide the option to include business crime coverage as an addition to an existing commercial property, business owner, or commercial package policy.
Tips for Managing Your Business’s Crime Risk
Maintaining accountability within your business is essential, even when it involves trusted employees. It is crucial to establish checks and balances for each department and implement robust authentication procedures for invoicing and fund transfers to mitigate risks effectively.
Key tips include:
- Conduct regular audits of financial records to detect any irregularities promptly.
- Enhance security measures by installing surveillance cameras on your business premises.
- Explore the risk management and loss control services offered by your insurance provider or advisory firm.
- Seek guidance from your insurer on staff training, fraud prevention, and remote work best practices, incorporating these guidelines into training materials, employee handbooks, and orientation programs.
- Introduce multi-factor authentication protocols for company email accounts to bolster cybersecurity.
- Ensure clear communication of your crime prevention policies to all employees to foster a culture of vigilance and compliance.
FAQs
How much does business crime insurance cost?
The cost of business crime insurance can vary depending on a number of factors, including the size and type of business, the location of the business, and the amount of coverage desired.
Generally speaking, the average cost of commercial crime insurance ranges from around $500 to $2,000 per year. However, it’s important to get a customized quote from your insurance provider to get an accurate idea of how much it will cost.
Are there any exclusions or limitations to commercial crime insurance?
There are some common exclusions and limitations that businesses should be aware of when considering commercial crime insurance. For example, most policies do not cover losses due to war, civil unrest, or nuclear incidents.
They also typically exclude losses that result from employee dishonesty that was known to the policyholder prior to the policy being in effect. Additionally, most policies have a maximum limit on the amount of coverage available.
Is commercial crime insurance required by law?
No, commercial crime insurance is not required by law. However, many businesses choose to purchase this type of insurance to protect themselves from potential losses. It’s always a good idea to consult with an insurance professional to determine whether or not business crime insurance is right for your business.
Does business crime insurance cover losses from cybercrime?
Yes, most business crime insurance policies do cover losses that result from cybercrime. This includes losses due to hacking, data breaches, and other types of online fraud.
However, it is important to check with your insurance provider to make sure that your policy specifically includes coverage for cybercrime. Not all policies will automatically include this coverage, so it’s important to ask about it when you’re getting a quote.
