Crime Insurance

Definition of Crime Insurance

Crime is perpetrated against businesses frequently, and not just obvious crimes like armed robbery. Companies can have money embezzled, secrets stolen and information sold. The worst part is that the items stolen may never be recovered. Losses due to crimes against a business affect a business’s profitability and need to be controlled with insurance coverage.

  1. Broad Definition

    • Crime insurance is any type of insurance that protects a business or individual against losses due to criminal activities. As companies grow in sites and employees, the likelihood of suffering a criminal loss increases if strict controls aren’t maintained. For this reason, many companies have begun to purchase crime insurance, which protects company property in the same way that flood and fire insurance do.

    Physical Theft

    • Crime insurance protects company property against physical theft such as loss of money or securities because of employee theft. Coverages and riders can be purchased to cover company property on-site, in transit and at other locations.

    White-Collar Crime

    • Crime insurance protects against a variety of white-collar crimes if the appropriate coverages are purchased. A business can protect itself against forgery, computer fraud, funds transfer fraud, counterfeit currency and credit card fraud.

    When It’s Needed

    • A major indicator of the need for crime insurance is if the business has employees handling cash. There is always the chance that an employee might be tempted. If the employer has the least reason to doubt an employee’s honesty, he should purchase a crime insurance policy to protect the business. On average, companies lose about 6 percent of their annual revenues to employee theft, according to the Association of Certified Fraud Examiners. While this is not the only way to steal, it is one of the easiest methods for employees.

    Why It’s Needed

    • Losses due to theft can irreparably harm a business. The American Management Association estimates that employee dishonesty causes up to 20 percent of business failures. That means one out of every five business failures happens because the business couldn’t recover from the employee theft.