Fidelity/Crime Insurance protects companies from losses stemming from crimes committed against the business entity. These losses can include cash, stocks, bonds, inventory or any other item that thieves can convert to cash. The insureds can file claims on their fidelity policies on losses attributable to theft, robbery, burglary, computer crime or misappropriation of funds, as well as the use of counterfeit cash, wire transfers or money orders to defraud the company.Businesses in which employees handle cash or tradeable securities as part of their regular duties must be concerned with the temptation that such duties present, especially for employees who may be in dire financial need or have had a track record of dishonest behavior. Regrettably, most business owners do not purchase adequate crime coverage to protect themselves from such events. Crime protection insurance is an essential part of any business insurance plan, as most commercial general liability policies do not offer coverage for losses attributable to criminal activity.
A study conducted by the Association of Certified Fraud Examiners found that the average business loses nearly six percent of its total annual revenue due to losses involving employee theft, fraud and embezzlement. The American Management Association estimates that up to 20 percent of the nation’s business failures are either directly or indirectly caused by incidents of employee dishonesty. In most instances, the thefts often are for small amounts over prolonged time periods, rather than for a huge amount at once.
Small businesses are especially vulnerable to the effects of employee theft, as they often operate at such slim margins that the loss of revenue can mean the difference between staying in business and shutting the doors. Since most business insurance policies either do not include crime coverage or supply only minimal coverage for loss of income due to employee dishonesty, business owners should consider adding fidelity coverage to their existing insurance plans.