Commercial Crime Insurance: How it Works and Why You Need It

Unfortunately, not all workers, vendors, and customers are equally trustworthy, and problems with theft, fraud, or forgery continue to impact businesses across the United States. According to a report by the AWCI, employee theft alone is responsible for some $50 billion in damages annually, contributing to nearly one-third of bankruptcies and business failures throughout the nation. At the same time, incidents of identity theft and other forms of fraud are on the rise among bad actors posing as customers; forged payments can cause further financial losses.

As your company grows in size and scope, the threat of commercial crimes will increase as well, making it essential to take steps to create protections from bad actors in and around the workplace. This is where commercial crime insurance comes into play. Read on to learn more about how commercial crime insurance works, what it covers, and why you should consider exploring policy options to keep your business safe from the malicious activities of dishonest employees and external cyber threats.

What is Commercial Crime Insurance?

Commercial crime insurance, or business crime insurance, is a type of insurance coverage that reimburses companies for financial losses caused by things such as employee dishonesty and theft, fraud, kidnap, ransom, forgery or alteration, embezzlement, extortion, money and securities, or other illegal activities. In most cases, commercial crime won’t be covered under a basic business insurance policy. Instead, it’s necessary to buy a separate policy that specifically outlines which types of crimes will be covered and what type of events trigger reimbursement. These coverage triggers are:

  • Loss Discovery Form: This type of policy provides coverage whenever a financial loss is discovered, regardless of when the crime was committed.
  • Loss Sustained Form: With a loss-sustained commercial crime insurance policy, only financial losses sustained during the policy period are covered.

Since many business crimes may not become readily apparent until months or even years later, most companies find loss discovery policies to be preferable. However, it’s advisable to carefully discuss coverage options with your insurance provider to create a policy that’s tailor-made to accommodate your business needs. 

Although it’s possible to attach commercial crime insurance to an existing multi-peril business policy, some businesses may wish to purchase a completely separate policy for coverage that clearly defines which types of crimes are covered.

What Does Commercial Crime Insurance Cover?

Commercial crime insurance policies vary widely depending on the provider. To ensure your business is fully protected, it’s essential to ensure your policy includes named perils that are most likely to occur at your workplace. In general, business crime insurance will cover many different types of financial losses caused by the illegal actions of employees, including:

  • Impersonation (identity theft)
  • Cash theft
  • Computer fraud
  • Embezzlement
  • Destruction of assets
  • Financial losses from an internal data breach

Remember, the language of commercial crime insurance policies will vary from provider to provider. It may be necessary to add more coverage provisions to your policy in case of certain scenarios. For example, while commercial crime insurance will provide coverage for a fake check used on the premises it may not specify coverage for outside hackers entering the system to steal information.

What is Not Covered under a Commercial Crime Insurance Policy?

Not all crimes that result in a financial loss for the company are covered under a commercial crime insurance policy. For example, if a partner or member of upper management steals essential computers or electronics that temporarily disrupt business operations, business crime insurance likely won’t cover any lost wages or revenue. Other events usually not covered by commercial crime insurance include:

  • Investigative and legal expenses
  • Stolen intellectual property, trade secrets, or data
  • Claimed losses based on inventory records and not evidence
  • Losses sustained with your knowledge
  • Wages previously paid to an employee who turned out to be stealing
  • Financial losses caused by a fire

How much does Commercial Crime Insurance Cost?

The cost of monthly premiums on commercial crime insurance will fluctuate widely depending on:

  • The provider
  • The location of your business
  • How many employees are on your staff, 
  • What type of named perils are included in your policy 

In this way, it’s possible to find commercial crime insurance policies that start at only a few hundred dollars to $5,000 a month or more.

Who Should Consider Purchasing Commercial Crime Insurance?

Virtually any business, big or small, should consider purchasing a commercial crime insurance policy. This is especially true for companies that accommodate a large number of customer transactions in a given work week. 

In addition, businesses that are responsible for keeping sensitive customer data secure may wish to explore business crime insurance in case credit card information or other personal details are stolen during a cyber attack. Other types of businesses that may need commercial crime insurance include gas stations, cleaning companies, retail stores, and financial institutions.

Tips for Preventing Commercial Crimes from Occurring

A gray wall with two security cameras

Crime remains a significant issue for businesses in the United States. According to the National Criminal Justice Reference Service, up to 80% of employees will participate in dishonest activities in the workplace unless measures are taken by the employer to prevent it. 

In addition, there are numerous external threats such as rising instances of fraud that can pose serious financial threats to businesses today. Here are a few simple ways to reduce the likelihood of employee crimes at your business.

Established Improved Security Measures

Always take the time to thoroughly vet all candidates before offering employment. This should include conducting a background check and getting in touch with any references provided by a new worker. In addition, be sure to personally meet with applicants before hiring to ensure they’re a right fit for the company and don’t display any kind of suspicious tendencies or behaviors. 

To prevent issues with forgery, fraud, or identity theft with customers, take the time to carefully train employees on how to identify counterfeit money and potential red flags during the checkout process. For instance, some individuals may attempt to use a stolen credit card or check to pay for products and services. 

Finally, consider improving existing electronic systems to make it more difficult for cybercriminals to gain access to critical data. Issues with intellectual property theft alone create significant financial losses totaling up to $600 billion a year for U.S. companies. 

Invest in Surveillance Cameras

The single most effective deterrent to commercial crime is installing security cameras throughout the premises. Not only will this discourage criminal activity, but if something like a theft does occur, you’ll likely have concrete evidence of the act for insurance purposes. Just be sure to cover any blind spots in the business, especially secure storage areas where valuable inventory or other items are kept.

Maintain Consistent Records

Make it a point to keep detailed records of company assets, including computer equipment, inventory, cash flow, deposits, and daily register counts, so you can quickly spot problems shortly after a crime is committed. Keeping organized records is especially critical if your business crime insurance only covers losses sustained during a particular policy period. If a crime does occur that isn’t covered under your commercial crime insurance policy, any records you keep may prove invaluable to law enforcement who are investigating the incident.

Protect Your Business with Commercial Crime Insurance

An illustration representing commercial crime insurance with a thief holding a fishing rod with a hook tat's attached to a business mans computer

At Torian Insurance, we create a completely customized commercial crime insurance policy made especially for your business needs. Our coverage will protect you from losses sustained due to crimes like employee embezzlement, fraud, theft, forgery, laundering, cyber attacks, and more. When you’re ready to learn more, contact Torian Insurance, and our friendly associates will help you get the coverage you need.

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