What is employee dishonesty insurance?

February 18, 2016

 

This insurance protects a restoration contractor from financial loss due to the fraudulent activities of an employee or group of employees. The loss can be the result of the employee’s theft of money, securities or other property of the employer.

 

Why do business owners need employee dishonesty insurance?

 

Fraud and embezzlement in the workplace is on the rise. The Association of Certified Fraud Examiners (ACFE) estimates business losses $400 billion per year or about 6% of total annual revenue. Small companies can be especially effected by theft and embezzlement because they can’t afford extensive safeguards and aren’t large enough to absorb losses. Workplace crime is carried out by employees 80% of the time. One in four employees who has committed fraud against their employer had been with the company more than ten years.

 

Is employee dishonesty insurance the same as a fidelity bond?

 

Yes, in most cases they are considered the same type of coverage. Employee dishonesty insurance is also sometimes called crime coverage, employee dishonesty bond, fidelity bond and crime fidelity insurance.

 

Who is covered under an employee dishonesty insurance policy?

 

An employer is protected from theft by its employees. In addition employers are protected from covered losses due to burglary and destruction. The exact definition of “who” is covered is defined in the policy, but should include all current or former employees, partners, members, directors, volunteers, trustees, seasonal employees and temporary persons at your direction and control.

 

What is covered under an employee dishonest policy?

 

Stand alone policies are designed to cover employee thefts, robbery and safe burglaries. Coverage can also include: 1. Forgery or alteration 2. Funds transfer fraud 3. Computer fraud 4. Credit card fraud 5. Money order and counterfeit fraud

 

What is third party coverage on an employee dishonesty policy?

 

This coverage, added by endorsement, extends coverage to a client with which you are under written contract to perform services. The policy will pay for loss of or damage to money, securities and other property owned or leased by a client from theft by an employee of the policyholder. This endorsement modifies the policy to include coverage at the client’s premises.

 

What are some of the typical exclusions in an employee dishonesty policy?

  • Accounting or math errors or omissions

  • Loss to income that you could have realized had there been no loss of or damage to money, securities or other property

  • Vandalism Governmental action, seizure or destruction of property by the government

  • Restatement of a profit and lost statement

  • Theft by you for you.

  • You can not steal from yourself; however coverage extends to partners, directors, members, and trustees.

Can employee dishonesty insurance be added to other insurance contracts?

 

Yes, business owner’s policies and other commercial office packages can add coverage by the base policy or by endorsement.

 

What are the disadvantages to adding this coverage to other policies?

 

Limits may be insufficient to cover real losses Terms, conditions and exclusions may limit coverage and only cover employee dishonesty losses marginally Business owners policies (BOP’s) may limit employee dishonesty to $10,000 Usually only first party coverage is available Employee dishonesty claims could impact your insurance policy designed for other exposures. (accountants error and omissions policies)

 

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