What Is Commercial Crime Insurance?
Commercial crime insurance covers losses associated with business-related crimes, such as employee theft, money and securities fraud, check forgery, and robbery. It’s most often purchased by retail businesses that handle cash, businesses with high employee turnover, and companies with valuable assets.
Every year, crime costs American companies billions of dollars, and small independent businesses often feel the impact hardest of all. Without the right type of business insurance, small businesses might go bankrupt or be forced to shut down in the aftermath of a crime. Fortunately, purchasing crime insurance can help you stem losses.
Commercial crime insurance, also known as fidelity insurance, protects your business’s assets against a host of crimes—more common ones like shoplifting and employee theft, and less probable threats like forgery and kidnapping. Before purchasing crime insurance, you should clearly understand what a crime policy will and won’t cover, the average cost of premiums, and where to purchase this insurance. We break down all of this information here, plus identify the best insurance providers for crime coverage.
Do You Need Commercial Crime Insurance?
Business crime is a widespread problem that could negatively impact your business’s profitability. Employee theft alone costs U.S. businesses $50 billion annually, and that doesn’t even account for other types of crime. There are several emerging areas of concern, such as cybercrime, contactless credit card fraud, and gun violence against retailers.
It’s a good idea for any business with valuable assets to have crime insurance, but it’s especially important for certain types of companies. You’re most in need of crime insurance if:
- Your business processes a high volume of cash, check, or debit/credit card transactions
- Your business has more than five full-time employees
- Your business has part-time or seasonal employees
- Your business sells lightweight inventory, such as grocery items, apparel, or small electronics
- Your employees have access to sensitive customer data or financial records
- Your business is located in an area that’s open to public foot traffic
If you’re concerned about crime, but your business doesn’t have the budget to invest in security staff or security systems, that’s also a good reason to buy crime insurance.
When evaluating your need for crime insurance, keep in mind that basic general liability insurance or property insurance won’t cover losses from most crimes. For instance, these policies don’t cover employee theft and typically offer only limited coverage for crimes committed by customers or other third parties.
In a few situations, you might be required to purchase crime insurance. For instance, if you offer your team an employer-sponsored pension plan or retirement plan, such as a 401(k), the law regulating these plans—called the Employee Retirement Income Security Act (ERISA)—requires employers to carry a certain level of crime insurance. This insurance is called an ERISA fidelity bond, and the bond protects the retirement plan from acts of dishonesty committed by the plan’s managers. You can purchase an ERISA bond separately, but it typically comes included with a crime insurance policy.
What Commercial Crime Insurance Covers
Crime insurance covers losses stemming from crimes committed by employees, vendors, customers, and other third parties. Here’s what commercial crime insurance typically covers, and some sample claim scenarios in each category.
Employee dishonesty is the most common type of crime that’s covered by crime insurance. For example, let’s say an employee steals cash from your petty cash drawer or pockets some cash from the cash register during a transaction. A commercial crime insurance policy will reimburse you for the lost cash.
Counterfeiting and Forgery/Alteration
Losses stemming from counterfeit money or forged or altered notes are also covered. If your company accidentally accepts counterfeit currency, crime insurance will reimburse you for the loss. Things could also get more complicated than that. Let’s say a customer breaks into your back office, steals some blank checks, writes out a bunch of checks to herself, and deposits them. That’s an example of check forgery, and crime insurance would cover the losses.
Money and Securities Theft
This category of crime coverage encompasses the theft of cash, checks, notes, and other securities. For instance, let’s say a criminal robs your employee while they’re on the way to the bank to deposit the week’s worth of business cash receipts. This is a classic case of money and securities theft that your crime insurance should cover.
Theft, Robbery, or Burglary (On- and Off-Premises)
Business crimes can involve assets other than cash, and they can occur at or away from your place of business. Crime insurance will protect you if a criminal breaks into your company safe or steals inventory from your office or shop. Crime insurance will also cover you if, for instance, someone steals your work laptop while you’re in transit to a conference.
This element of crime coverage kicks in when someone uses your business’s computer systems without authorization. For instance, an employee might steal proprietary customer data or hack into your payroll system to divert money into their own bank account. These are examples of covered incidents of computer fraud.
Funds Transfer Fraud
Funds transfer fraud is a narrower category of fraud in which someone gives false instructions to a financial institution to facilitate a transfer of money. It often affects businesses that give employees access to financial records. For example, say an employee hacks into your business’s online checking account and transfers money to their personal checking account. This would be covered by crime insurance.
Kidnapping, Ransom, and Extortion
In rare circumstances, more serious crimes might affect your company. For instance, if a criminal kidnaps your business partner or an employee of the business and demands a ransom, a crime insurance policy will cover the ransom amount up to the coverage limit. Usually, coverage for these serious crimes will increase your monthly or annual premium.
Theft of Client Property
This is another type of crime that you’ll often need to pay extra to get coverage for. It’s common for businesses like moving companies or cleaning companies to receive complaints that their employees stole from customers while on the job. Crime insurance can cover your business for theft of client property.
Overlapping Insurance Policies
Depending on the different types of insurance your business already has, there might be some overlapping coverage. For example, cyber liability insurance covers hacking, computer fraud, and other cybercrimes. Property insurance will cover physical damage to your building or other assets resulting from a crime, though financial losses won’t be covered unless you have crime insurance.
If you do end up with two or more policies that have overlapping coverage, the insurance companies will sometimes divide up responsibility for the claims. In other cases, one of the insurers might be designated as the primary insurer with initial responsibility for paying the claim. Be careful because some insurers will cancel coverage if you have a duplicate policy. You can often avoid duplicate coverage by purchasing all of your business insurance policies through the same insurance carrier.
Discovery vs. Loss-Sustained Crime Insurance
Insurance carriers structure crime insurance policies in one of two ways: discovery or loss-sustained. In a discovery-based crime insurance policy, the insurance carrier will accept the claim as long as you discover the crime during the policy period. If you only notice that the crime occurred after the policy expires, you might be out of luck.
For instance, let’s say your crime policy spans from January 1, 2020 to December 31, 2020. On December 24, 2020, an employee steals money from your cash register. However, you’re out of town for an extended period and don’t notice the loss until March 15, 2021. In a discovery-based policy, your loss won’t be covered since you noticed the crime well outside of the policy period. Most discovery policies have a 60-day grace period at the end of the policy period for you to notice and report losses.
A loss-sustained policy is friendlier to the policy holder. A loss-sustained policy will cover losses that occur while the policy is in effect, even if you don’t notice the loss and file a claim until the policy expires. Usually, you have one year after the policy expires to report losses and file a claim.
What Crime Insurance Doesn’t Cover
Every crime insurance policy is a little different, but there are a few things which crime insurance generally won’t cover:
- Crimes resulting from business errors, such as leaving your shop unlocked
- Accounting errors
- Criminal acts by business owners or top management
- Criminal acts by independent contractors
- Successive criminal acts by the same employee, such as multiple incidents of theft (only the first act will be covered, after which you retain the employee on your payroll at your own risk)
- Legal fees (most insurers will cover legal fees only if someone sues you for failure to pay a forged check or promissory note)
In addition to these exclusions, some insurers won’t work with businesses in certain industries. For instance, law firms, claims adjusters, bankers, and others in the financial industry might find it challenging to purchase crime insurance.
Cost of Crime Insurance
The cost of crime insurance is quote-based, which means you can find out your premium only after giving the insurance provider several details about your business. According to business insurance agency Bernard Fleischer & Sons Inc., a crime insurance policy would cost about $300 per year for $100,000 of coverage.
The cost of crime insurance is typically affected by the following factors:
- Number of employees
- Annual sales revenue
- Value of your business assets
- Whether you have an online business, a brick-and-mortar location, or both
- Your business’s industry and typical crime levels in that industry
- Type of crime coverage (e.g., you’ll pay a higher premium for kidnapping coverage)
- The security measures you already have in place to minimize losses
Your cost would also be affected by the size of your deductible and the amount of coverage you’re seeking. A deductible is the amount of money that your business has to pay out of pocket before the insurance carrier will pay out a claim.
How to Lower Crime Insurance Costs
Compared to other types of insurance, crime insurance often gets placed on the back burner. Most small business owners trust their employees and customers and believe that they won’t become crime victims. However, the cost to your business if a crime does occur is often much higher than the premium itself. Fortunately, carriers will reward you with lower premiums if you put internal security measures in place.
Here are some proactive ways to lower the cost of commercial crime insurance:
- Strengthen vetting procedures when you hire employees and conduct background checks
- Strengthen vetting procedures when you hire vendors
- Reconcile cash register receipts against bank deposits to quickly spot theft
- Install security cameras at your business location (like these, which should fit even a small budget)
- Give access to your financial records to a minimal number of employees
- Password protect your digital assets
- Utilize panic locks to guard access to your back office and safe
Best Places to Buy Crime Insurance
Several different carriers offer crime insurance coverage, many as a stand-alone policy and others as an add-on to a business owners policy (BOP). A BOP, also called a multi-peril policy, brings together several types of insurance under the umbrella of a single policy. By purchasing crime insurance as part of a BOP package, you can lower your costs.
When shopping around for crime insurance, we recommend opting for a carrier who is A-rated or higher by AM Best. AM Best is a commercial credit agency that rates insurance companies based on their financial stability.
Here are our top recommended insurance providers to buy crime insurance:
Hiscox is an A-rated insurance company that offers crime insurance as an add-on to their industry-leading BOP. Though you can purchase higher limits, their standard crime package includes $10,000 of employee dishonesty coverage, $25,000 of computer and funds transfer fraud coverage, $2,500 of forgery and alteration coverage, $10,000 for loss of money and securities, and $5,000 for theft of client property.
Hiscox’s crime insurance package is available for all small business industries, except law firms, claims adjusters, and financial companies. You can get started with an online quote or work with an independent insurance agent.
CoverWallet is an insurance marketplace that simplifies the process of shopping for business insurance. After you answer a few questions about your business in their online questionnaire, CoverWallet will instantly display quotes for crime insurance from several A-rated insurance companies. You can review the quotes and choose the one that offers comprehensive coverage at the best price. CoverWallet also can also generate quotes for cyber liability insurance if you have digital assets that you want to keep safe.
Travelers has an AM Best rating of A++ (the highest possible rating) and sells a crime insurance package called The Wrap. This package combines employment practices liability insurance, directors and officers insurance, professional liability insurance, and crime insurance in one policy. If you buy this package, you’ll be covered for criminal acts by business partners, top management, employees, vendors, and other third parties.
Travelers even offers a special add-on for social engineering liability coverage. Social engineering is when a criminal communicates with your company, typically by email, and coaxes a member of the company to send them money. These emails look legitimate, but their purpose is to defraud your company. To get started with Travelers, find an independent agent near you.
The Hanover has an A rating and is a good place to buy crime insurance if you’re in a hard-to-insure industry or need extended amounts of coverage. They offer a product called Fidelity and Crime Advantage, which offers a full suite of crime insurance coverage. Businesses needing additional protection can request excess crime coverage from The Hanover. They also offer specialty crime protection for banks, insurance companies, and other financial institutions. You can get started with The Hanover by finding an agent near you.
Erie Insurance has an A-plus rating and is licensed to provide insurance in D.C. and 12 states—Illinois, Indiana, Kentucky, Maryland, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and Wisconsin. If your business is in one of these states, you might be able to get a good deal on crime insurance from Erie Insurance. Their crime insurance offers the full scope of protection, but they also go a step further by offering risk control services to minimize your claims. Erie’s risk control team will evaluate the crime risks your business face and help you address them. This can be helpful for a small business owner who isn’t able to afford full-time security staff.
Commercial Crime Insurance: Bottom Line
No small business owner wants to believe that their company will be the victim of a crime, but it can happen even to the most well-run companies. In these situations, having commercial crime insurance can be essential to your business’s survival. Make sure you have strong internal safeguards in place to act as your first line of defense. And if the unexpected happens, your crime insurance is there to help.