As a business owner, it’s understandable to feel swamped by all the different kinds of commercial insurance options and the jargon that goes with them. Insurance shopping can be a pain, and even more so when you’re shopping on behalf of your business.
We want you to be able to make an informed decision when it comes to buying insurance. In this guide, we’ll go over why you need business crime insurance, its benefits, and when it might be unnecessary.
What is business crime insurance?
Business crime insurance (AKA commercial crime insurance) provides coverage for your business in case of business-related crimes.
Covered crimes vary from policy to policy, but typically include theft, robbery, forgeries, medical expenses, property damage, and costs for lawsuit defense.
Why do you need business crime insurance?
You might already have bought other kinds of commercial insurance, so now you’re wondering why do you still need to specifically buy business crime insurance?
The typical business property insurance policy won’t cover losses from criminal acts. Unfortunately, crimes happen, and they could happen to your business. 95% of employers encounter losses related to criminal acts at some point in their operations.
Insurance is here to give you the following protection.
- Insurance protects you against financial loss
The number one reason most businesses get commercial insurance is so that they become protected against unexpected incidents that may be expensive. Crime such as theft can be extremely costly for your company, and as such, you should have adequate coverage to protect you against financial loss.
- It protects you against reputational damage
Reputational damage can actually cause you substantial financial losses. This kind of damage may be fallout due to criminal acts committed by your employees or partners. Fraud and embezzlement can seriously hurt your business’ reputation and credibility.
If you have insurance protection, your insurer may be able to help you with the legal defense fees and other expenses when fighting against reputational damage. Larger enterprises typically have an insurance policy securely in place so that they don’t need to worry as much about the ramifications following crimes committed within the company.
On the other hand, smaller companies will often struggle with reputational damage because they don’t have the money or expertise to combat it. With insurance, at least you will be able to afford related expenses, making it significantly easier to bounce back.
- It helps you meet contract requirements
If you’re a smaller business, you might not yet realize that a lot of enterprises and bigger companies have contract requirements when they work with other companies. One requirement is that you have adequate insurance.
Without a proper commercial insurance policy, your business might miss out on meaningful business opportunities. If you want to do business with other organizations, it is important to be able to show the right proof of insurance.
- You’ll be more prepared for the unexpected
Crimes can happen at any time, making them able to create significant expenses and troublesome circumstances for your business. With business crime insurance to protect your company, it becomes much easier to deal with otherwise disastrous losses and damages.
- You can have peace of mind
Running a business is difficult, with many expenses you might need to anticipate and pay. With insurance, you can lower your worries, because at least you will know what negative events will be covered by your business’ insurance policies.
Crime can be scary and worrisome, on top of causing a financial impact. Reduce the potential stress of crime on you and your business through having adequate insurance coverage.
What are examples of business crime insurance claims?
Different insurance carriers will devise commercial crime insurance policies with varying details of coverage. The typical business crime insurance will cover the most common and generic crime insurance claims, such as the following.
Theft
If your employees steal from your business, insurance may be able to provide financial compensation.
A theft claim can actually be more complex than other types of claims even though it sounds straightforward – this is because there are so many types of theft, such as employee theft, petty theft, and larceny.
Third party theft occurs when someone not affiliated with the company steals from your business.
A crime policy will usually only cover money and securities.
Robbery is also a fairly common concern and seems like theft, but it is often considered a separate form of coverage due to the threats (or use) of violence involved in a robbery attempt. In case of a legitimate robbery, your crime insurance policy should actually cover _more _losses than for regular theft.
Robbery claim compensation might include assisting employees who witnessed the robbery with supportive costs.
Dishonest employee behavior
Employee dishonesty other than theft is also an extremely common commercial crime insurance claim. It may include crimes such as:
- Skimming
- Forgery
- Embezzlement
- Inflating expense reports
- Data theft
- Stealing company funds
Some industries will be more vulnerable to certain types of employee dishonesty than others.
Forgery
Forgery is a type of dishonest crime that many business managers and owners know about but simply don’t know the name for it.
Forgery claims related to credit and debit cards are very commonplace.
In addition, if an employee takes a check for your business and steals that money by making it payable to themselves, it can count as forgery, which is a common insurance claim.
Counterfeit currencies
Counterfeit money is used more rampantly than you might expect. If your business accepted cash, check, or a money order that seemed legitimate but is actually fake, your crime insurance policy should be able to compensate you.
When do you not need business crime insurance?
If your risk level for business crimes is quite low, you might not need business crime insurance. Not every business absolutely needs commercial crime insurance coverage.
Sole proprietorship or partnership businesses
If your business is a sole proprietorship (or partnership), you might be certain that you won’t require any business crime insurance. Still, it’s often a good idea to at least have basic coverage in place, because the unexpected could still happen and there are so many different kinds of crime.
Corporations and limited liability companies (LLCs)
If your business is a corporation or a limited liability company in which all your employees are either owners or shareholders, you might not need to purchase a commercial crime insurance policy. However, you should know that in this case, individual employees would end up being responsible for any criminal acts that they commit to the LLC.
E-commerce or online business
Many businesses today operate online. If yours is an entirely online business without any physical premises or brick and mortar store, then you might not need business crime insurance.
Still, there are other kinds of digital crime that can be committed against your business. In the best interests of your business, you might want to consider purchasing cyber liability insurance or other kinds of coverage to protect your company.
What businesses need business crime insurance the most?
Some businesses need commercial crime insurance more than others because of their elevated risk levels. When buying insurance, it’s smart practice to assess your risks.
Here are some factors that can influence your risk level and may make your business have increased vulnerabilities.
The kind of employees you hire
Even though employee dishonesty is a big problem, especially in retail industries, it doesn’t mean all employees are dishonest. The actual percentage of employees who commit crimes is very small.
Still, what type of employees you hire can affect your risk level.
If you hire part time employees or volunteers for your business, they are more likely to steal from you. They do not have as much a sense of loyalty or responsibility, and may not feel as compelled to work in your business’ best interests.
The industry you operate in
The industry you run your business in greatly affects how much coverage you need.
For example, companies in the retail industry are especially prone to encountering criminal acts, with shoplifting being a widespread concern. That is in part because retailers have physical premises, huge inventories, and employees have easy access to goods. Employees in this industry might also have access to money and other important things.
If your industry sees high levels of crime, it might be worth getting higher theft coverage limits so that you are adequately insured.
You have valuables
If you are a company that has valuable goods or other assets that are easily accessible by workers, it is critical that you have enough commercial crime insurance coverage. These things are often targeted by opportunistic criminals, resulting in losses and replacement expenses.
How do you save money on business crime insurance?
If you’re looking to lower your commercial crime insurance premium, there are certain strategies your business could implement.
Utilize best practices for hiring new employees
When getting new insurance, an insurance company might look at your company’s prior history of claims. If security, crime, and employee dishonesty have been frequent issues, the insurer might deem your business high risk and increase your premium.
If you do extra screening and background checks on your potential hires, you may be able to increase your security level and reduce the number of claims you need to file. Over time, an insurance company might be able to reduce your premium based on a cleaner claims history.
Know your coverage limits
Claims do have coverage limits, such as for criminal theft claim expenses. The higher your limit, the more expensive your insurance premium will typically be.
If you don’t anticipate ever losing as much value as the coverage limit, you may want to consider a lower coverage limit business crime insurance policy. That way, you’ll still have the coverage you need, but you won’t have to pay as much money every billing cycle.
Shop around for the right insurance policy for your business
Having comprehensive coverage is very important, but not every insurance policy is optimal for your particular business.
Before you pick one insurer to go with, make sure you take the time to shop around for the insurance policy that suits your needs the best. Are there gaps in your coverage, or is everything you are worried about covered? Are the coverage limits enough to cover repair or replacement costs for your business’ assets?
What is excluded from business crime insurance coverage?
One pitfall many businesses fall into when buying insurance is not knowing what is NOT covered by their policy.
The typical business crime insurance policy will make note of exclusions, which means that in these cases, you will not be able to successfully file a claim with your insurance.
Exclusions include:
- Criminal track records: An individual with a history of employee theft, especially against your company, won’t be covered if they steal from you (again). This is to discourage risky business and hiring practices
- Cyber crime: Even though certain cyber crimes are covered, many types aren’t. Data breaches, which can cost your business substantial amounts of money, are often NOT covered by standard crime insurance policy. You would need special cyber crime insurance.
- Unproven crimes: If the crime you’re filing for, such as stolen inventory and goods, doesn’t include hard proof of someone stealing, you won’t receive coverage. Surveillance footage usually counts as adequate evidence.
When buying insurance, make sure you read the terms carefully and find a competitive premium, along with coverage limits that suit your business the best.
About The Author
Edited by:
Bryan Huynh
•
Product Tester & Writer
