Generally, employee theft is one of the many issues employers face in their businesses. Due to this, employers need to understand the essence of employee dishonesty coverage as well as how it works and why it is needed.
Employee dishonesty coverage is a type of insurance coverage for employers in cases where they get stolen from by an employee. It is also referred to as employee theft coverage or fidelity coverage. It covers losses as a result of employee dishonest acts such as theft of money and other valuable properties of the employer.
Employee dishonesty coverage is commonly not offered as a standalone policy; instead, it is offered as additional coverage on a commercial crime insurance policy.
What Employee Dishonesty Covers
Employee dishonesty coverage is generally designed to financially cover an employer from employee theft. It covers several events, including:
• Forgery and alteration
In instances where an employee forges a check, promissory note, or draft to get financial benefit at the expense of the company, this insurance will offer coverage for it. Also, in cases where you hand a paycheck to your employee and they tamper with the amount and steal from you, employee dishonesty insurance will cover it.
• Embezzlement
Employees with access to the company’s or business funds are given a fiduciary responsibility to protect the company’s assets and make sure they are properly used. If this employee converts the company funds for personal use, the business may be severely affected. In this event, this insurance policy will cover it and shield your business or company from a very costly loss.
• Theft of money
If an employee steals funds or securities from your company, irrespective of the method used, employee dishonesty insurance will fully cover losses your company faces.
• Credit card fraud
Whether an employee misuses a customer’s credit card or charges one of the company’s credit cards, it can severely destroy the company financially and its reputation. This insurance coverage covers credit-related losses, charges, and debit cards.
Aside from these, other events this insurance covers include property theft, computer fraud, and fidelity bonds.
What Employee Dishonesty Doesn’t Cover
Employee dishonesty insurance coverage generally covers several losses employers face from their employees. While it does this, there are some employee dishonesty losses it doesn’t cover. These events include:
- Theft by the company or business, its partners, or its owners.
- Negligent, improper, or incompetent actions taken.
- Loss of trade secrets, data, or private information.
- Losses due to government action.
- Late reported losses.
- Consequential losses.
- Parting with money voluntarily.
- Losses covered by other insurance policies.
- Criminal acts.
- No financial losses.
If your company faces financial losses due to any of the above events, it will not be covered by employee dishonesty coverage.
How Much Does Employee Dishonesty Coverage Cost?
Depending on several factors like business type, business needs, number of employees, and coverage type, how much employee dishonesty insurance costs is determined.
Among these factors, the most important factor considered by most insurance companies is the size of your business. The higher your number of employees, the higher your premiums are.
Another factor used in determining insurance costs is your company’s revenue. The more your company earns, the more chances of theft. Using these factors, insurance companies can determine the level of risk your business poses and determine your insurance premium.
Why Do I Need Employee Dishonesty Coverage?
There are several reasons why you may need employee dishonesty insurance coverage. Just as previously stated, employee dishonesty coverage financially covers companies from financial losses due to employee dishonesty. However, you may need employee dishonesty insurance coverage if:
- You have a big company.
- Your company has more than one employee.
- If your company’s revenue is high.
- Your business or company faces losses due to employee dishonesty.
This insurance shields your company against theft, fraud, security, and other dishonest employee actions.
Who Needs Employee Dishonesty Coverage?
The reason why you may need employee dishonesty insurance depends on your business size, type of operation, and employee responsibilities.
Most business owners consider this insurance to be just for large companies, but it is for all businesses, irrespective of size. Every type of business with employees often faces losses due to employee dishonesty.
However, businesses that deal with cash transactions, valuable inventory, or sensitive customer information are prone to these types of risks. Also, companies that entrust their employees with expensive financial responsibilities or access to personal data should consider getting this insurance in case of any losses.
