Who Should Have Employee Dishonesty Coverage?
Employee dishonesty coverage protects businesses in the event that an employee engages in bad faith behaviors like theft, fraud, forgery, embezzlement and more. Coverage may vary according to policies and endorsements, but it generally covers losses from activities conducted by current employees, past employees, trustees, partners, directors, seasonal employees, volunteers and temporary employees.
While not every company may need employee dishonesty coverage, also sometimes known as a fidelity bond or crime insurance, those who place faith in their employees to manage tremendous assets and securities can benefit from having this coverage in the event something goes wrong.
These advantages extend to large companies, which have more complex administrative tasks and higher staff rolls that increase the odds of bad faith behavior. They also extend to small companies, which can incur significant losses without the ability to absorb them as a result of their smaller capital and lower earning power.
In short, a wide range of companies may find it advantageous to have an employee dishonesty policy as part of their overall insurance and risk management program. Learn more about these policies and what companies may need them most by reading on.
What Do Employee Dishonesty Policies Cover?
Employee dishonesty policies generally cover first party losses to the named insured as a result of illegal or unethical internal behaviors by employees. The policies can also be designed to cover claims/losses arising from third party exposures as well. Third-party endorsements to commercial property or businessowners policies for losses related to employee dishonesty can similarly help companies cover liabilities created by internal bad actors.
Coverage may also not apply to any vendors, service providers, contractors or other relationships that do not explicitly involve official employees or internal company actors. At the same time, the coverage can extend to board members and trustees who are involved in making company decisions but not on the company payroll.
Limits for coverage vary according to the insurer and plan, but they generally cover a minimum of $100,000 and can be expanded to cover $1 million or more. Many of the policy coverages are customizable and require risk evaluation prior to purchase.
Which Companies Need Employee Dishonesty Coverage?
A wide range of companies should consider employee dishonesty coverage in order to protect them from risks associated with internal theft, fraud or general bad faith behaviors leading to losses. Financial companies in particular are at risk for internal theft and fraud as it relates to company assets and the assets of clients. Handling large sums of money and manipulating it through complex transactions increases the risk of deliberate mishandling and theft.
Large companies with employee retirement accounts, like pensions, also present increased risk of fraudulent activities. According to Association of Certified Fraud Examiners (ACFE) large businesses lose around $400 billion per year to fraudulent activities, or about six percent of their total annual revenue.
Small companies where business partners, directors or controlling managers have the capacity to embezzle funds, commit theft or engage in fraud that threatens a significant portion of company assets are also at risk. This category happens to encompass a wide range of businesses. Loyalty and close relationships are not a measure of trustworthiness, either, since once in four individuals who commit fraud against their employer have been with their company for ten years or more.
In short, nearly any company with assets and a large amount of trust placed in employees can hedge against risk using an employee dishonesty policy. You can speak with an expert that handles commercial insurance in Nevada to find out how to protect your company from devastating losses that occur because of people you thought you knew and trusted.