This type of policy is designed to protect companies against losses relating to employees or third parties.
Commercial crime insurance policies provide businesses with protection against substantial losses resulting from employees or third parties.
It covers lost money and other assets in the case of forgery, fraud, theft, burglary and other risks.
First-party commercial crime insurance protects a business against its own losses, resulting from a criminal activity of some kind. Third-party coverage, on the other hand, protects the business in case another business or entity claims to have suffered direct losses as a result of criminal acts perpetrated by your business.
It remains important to maintain regular audits and strong internal controls and checks, in addition to a reputable outside CPA firm to reduce the instance of employee theft. That said, even companies that have been vigilant in this regard have been known to suffer losses worth multiple millions of dollars. A 2017 report cited by Embroker showed that companies worldwide lost an estimated $4 trillion to fraud in that year alone.
A proper-fitting commercial crime insurance policy can protect businesses against such losses.
A good policy can provide a business with a safeguard against corporate asset theft losses through increasingly sophisticated online and computer schemes.
In terms of protection against internal fraudulent actions against the company, fidelity bonds are a sub-type of this coverage. They are typically considered to be comparable to general crime policies, though some important differences do exist. For example, a general policy will usually have higher limits, but if customers have suffered damages related to the crime, the fidelity bond would reimburse them.
Commercial crime insurance policies are typically recommended to companies that have a higher exposure rate to petty theft. These are businesses that include the following among their practices:
- Engaging in cash transactions
- Hiring part-time workers
- Managing inventory
- Have in-house expensive equipment
Businesses exposed to digital theft and manipulation can also benefit from this type of policy. Companies at a higher risk are those that deal with the following:
- Digital transactions
- Customer data
- Sensitive financial records
These are some of the businesses who are typically advised to consider a commercial criminal insurance policy for protection against the damage that could result from those exposures.
