Employee dishonesty insurance

Small businesses need employee theft insurance to protect them from the inside out. Most employees will do the right thing, but it's smart to have coverage in case something goes wrong. In a 2024 study by the Association of Certified Fraud Examiners (ACFE), 38% of reported fraud cases worldwide came from the United States and Canada.

Employee dishonesty insurance can help small businesses minimize losses and stay strong if employee theft is discovered.

What is employee dishonesty insurance?

Employee dishonesty coverage, also known as fidelity coverage or employee theft insurance, protects your business due to a worker's illegal actions, such as theft or fraud. Progressive Commercial offers employee dishonesty as an endorsement to a business owners policy (BOP). Some insurers also include employee dishonesty coverage as part of a broader commercial crime insurance policy.

Employee dishonesty insurance vs. commercial crime insurance

Employee dishonesty and commercial crime coverage can both protect your business against theft and fraud, but employee dishonesty coverage is limited to criminal acts by your employees.

Commercial crime insurance, on the other hand, can include crime committed by employees and people outside the company. It involves a wider range of unlawful behavior, such as social engineering fraud, computer fraud, and burglary.

If your business involves employees handling cash and you keep a lot of inventory in stock, employee theft insurance coverage may be right for your business. However, certain industries are more prone to criminal acts from people outside your company, such as financial services or accounting firms. In those cases, other commercial crime protections could be a good fit.

Employee dishonesty insurance vs. surety bonds

Employee dishonesty insurance and surety bonds both serve as financial protections for businesses, but they differ significantly in purpose and how they function. Understanding these differences is key to choosing the right coverage for your business.

Employee dishonesty insurance protects businesses from losses caused by an employee's dishonest acts like theft or fraud. It pays companies directly and usually offers broader coverage than bonds.

Surety bonds make sure a business or contractor follows through on their commitments. If they don't, the bond helps cover the loss or gets the job done.

Some bonds, like fidelity bonds, can cover employee dishonesty, but they work differently than insurance. They're often required for certain jobs and usually have stricter rules and limited coverage.

What does employee dishonesty insurance cover?

Employee theft insurance covers a range of fraudulent behaviors from falsifying hours worked to stealing company funds. Dishonesty coverage can help your company recover if your staff intentionally commits illegal acts like:

• Illegal transfer of funds: Employees may steal company funds or assets, or misuse resources for personal gain.
• Computer fraud: An insider mighthack into your business's computer systems to modify records.
• Forgery: Team members illegally signing or altering checks or contracts without authorization is considered forgery.
• Bribery: Members of your staff may accept or offer bribes or kickbacks to third parties in exchange for personal opportunities.
• Inventory theft: Workers could steal company products or supplies for personal use or resale.
• Misuse of credit cards: Employees may use business-issued credit cards in ways that violate company policy.
• Doctoring time worked: Personnel who falsify hours or manipulate payroll are altering records to increase their compensation.

What isn't covered by employee dishonesty insurance?

Although many illegal activities are covered by employee theft insurance, there are certain exclusions. Exceptions typically include:

• Crimes committed by non-employees, such as contractors, vendors, and customers.
• Theft and other illicit behavior by business owners or partners.
• Unintentional mistakes, such as accounting oversights done without malice. Vicarious liability, which can be included in a BOP, can protect you from honest employee errors like these.
• Cyber attacks and data system breaches by external parties. This type of theft would be covered by cyber insurance.
• Theft of trade secrets, client lists, or proprietary information.

Who can benefit from employee theft insurance?

Many businesses can benefit from the protections of dishonesty insurance. However, some businesses may be particularly good candidates. For example, theft of inventory in a retail shop is a double loss: the cost of the stolen merchandise and the lost revenue from not being able to sell it.

Businesses in financial services and manufacturing are also strong candidates for employee theft insurance. According to the ACFE, these are the private sectors with the highest rates of employee theft.

Will a business owners policy cover employee theft?

It depends on your policy. A BOP helps if an outside party steals your business property, but they don't always cover theft that comes from within your team.

To get coverage for inside theft and employee dishonesty, you'll need to add an endorsement to your business owners policy. Review all the BOP coverage options today. Progressive Commercial makes this process easy, so you can stay protected with insurance you trust.

How can you prevent employee theft?

Many large corporations have internal audit teams that identify and prevent fraud. But what can you do as a small business owner? Here are some procedures you can implement immediately:

• Establish clear policies and guidelines for your employees.
• Conduct audits to identify possible misconduct.
• Run background checks on job candidates.
• Create a zero-tolerance policy for any dishonest behavior.
• Encourage anonymous reporting of illicit activity.

Protect your business from internal risks

By investing in employee theft coverage, you're safeguarding your company's financial wellbeing and its reputation. You're also investing in your employees by demonstrating a commitment to trust and accountability. Call or get a quote online to customize a business owners policy with Progressive Commercial.