ARI Blog: Article

What is employee dishonesty insurance?


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

Why do business owners need employee dishonesty insurance?

Fraud and embezzlement in the workplace are on the rise. The Association of Certified Fraud Examiners (ACFE) estimates business losses $400 billion per year or about 6% of annual revenue. Small companies can be significantly affected 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 have committed fraud against their employer had been with the company for 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 sometimes called crime coverage, employee dishonesty, fidelity bond, and crime-fidelity insurance.

Who is covered under an employee dishonesty insurance policy?

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

What is covered under a dishonest employee 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 underwritten 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

  • The 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 loss 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 owners’ policies and other commercial office packages can add a base policy or endorsement coverage.

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

  • Limits may be insufficient to cover actual 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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