Crime insurance protects businesses in case of employee theft, robbery, burglary, forgery and embezzlement. Crime, especially internal white-collar crime, is a common concern for business owners. According to Chubb Specialty Insurance, every company, regardless of size, is a potential target for crime, especially from within. Well-organized fraud can last for years, costing a company enormous amounts of money. If an employee steals your inventory, embezzles money or forges checks, crime insurance covers your losses depending on your policy.
The Association of Certified Fraud Investors calls employee theft “asset misappropriation.” Although this is the least costly of business crime, it includes stealing cash, equipment, inventory, supplies and even information. The ACFI says on average, this can cost a company about $65,000 per incident. Most regular business insurance policies don’t cover employee theft, but crime insurance does.
Robbery and Burglary
Robbery and burglary is the act of illegally taking money and other goods by force or violence. Crime insurance protects you if someone forcefully enters your place of business and steals property, money or other assets. If your business is a victim of robbery or burglary, you must register the crime with the police to become eligible for crime insurance.
Forgery and Alteration
If employees have access to checks, they may forge or alter checks to steal money from the company bank account. Altering checks may include raising the check to a higher amount. Alternatively, a burglar could steal the company checkbook and start forging checks drawn on the company account. Crime insurance may cover losses from fraudulent checks drawn on a corporate account.
Crime insurance covers instances of computer fraud. Computer fraud is also called electronic theft and usually involves the fraudulent transfer of money or securities using a company computer to transfer money to a personal account. Someone may also break into a business premise and send fraudulent instructions to a financial institute to transfer funds to their own account. An outside hacker can gain access to a company computer and intercept incoming wire transfers.
Fraud and Embezzlement
According to InsureNewMedia, a risk management company catering to specialty technology businesses, the average U.S. business loses 6 percent of total annual revenues to employee fraud. Embezzlement is the misappropriation of valuables that have been entrusted to an employee. Fraud and embezzlement include crimes such as fake employees on the payroll, false accounts payable and fake suppliers. Funds transfer fraud is covered by crime insurance. Funds transfer fraud means sending fraudulent instructions to a financial institution that transfers money out of an account without the account holder’s knowledge or consent.