Employee Dishonesty Insurance Coverage

As the economy continues to sputter, we constantly hear stories about employees committing desperate acts against their employers and even customers.

Here are some scenarios that we have seen happen to some of our clients in the past year:

• An employee stole inventory from the company and disappeared. • An employee used the company credit card for personal purchases like a television, gas, clothes, etc. • An employee skimmed money from the till for over 12 months, amounting to a total loss of about $20,000.

The question we often get is on the possibility of purchasing insurance to cover these types of acts. You can undoubtedly purchase coverage for this, but it must be done by adding Employee Dishonesty coverage to a Crime Policy.

Employee dishonesty insurance is coverage for just that: dishonest or criminal acts committed by employees. It covers losses where an employee steals money, securities, or even tangible property. Some policies will even cover the theft of clients’ belongings.

What is the typical limit? Like always, this depends. Some companies are much more cash-heavy than others, and the risk is more significant for this type of loss. However, the typical limit we will see is anywhere from $50,000 to $100,000 in coverage.

How much does the coverage cost? Depending upon the limit and type of business, the premium starts at a couple of hundred dollars a year. Premium is almost always based upon the number of employees within the company.

Any policy exclusions?

• Acts committed by an owner, officer, or director within the company. • Inventory shortages where the sole proof of loss is an inventory computation. • Any employee discovered to have a history of prior dishonest acts either before or after being employed by the insured.