Weigh the Pros and Cons of Employee Dishonesty Insurance
Employee dishonesty coverage protects businesses against criminal acts committed by employees that results in loss of money and property. This valuable protection is offered by some insurance companies, but it’s important to know what you’re getting before you purchase a policy.
What it does
Employee dishonesty insurance safeguards against theft of money, property and securities; it also defends against wilful damage to property. For instance, if an employee smashes a computer or punches a wall in, the insurance will likely cover it. Losses from all employees are included but coverage is based on incidents, meaning if more than one employee is involved in a single theft, the payout is based on that single incident.
Traditionally rates and deductibles will be determined by your company’s level of risk. You can elect a more generic coverage as part of a business insurance package. If you prefer higher loss limits or more customized coverage, look into separate employee dishonesty insurance policies.
What it doesn’t do
Employee dishonesty insurance isn’t liability insurance. You are covered in terms of property your business owns, holds for others or for which it is legally liable. Theft or damages caused by employees from companies that provide services to your business are not typically covered.
Employee dishonesty insurance also generally won’t cover loss of:
- Intangible assets such as trade secrets or electronic data,
- Loss of employees’ property,
- Damage covered by another insurance policy, and
- The unexplained disappearance of property. (In other words, even if you believe something has been stolen, it’s not covered unless you can prove the theft.)
The policy owner carries the burden of proof for employee dishonesty claims. You must provide conclusive proof that an employee brought about the loss before insurance companies will pay the claim.
Lastly, do not plan to replace a fidelity bond with employee dishonesty insurance if a bond is required by a funding source or other contractual agreement. Federal Bonding Program bonds, designed to motivate employers to hire hard-to-place applicants, reimburse employers with no deductible for loss due to employee theft.
Consider your options
Your business can cover theft losses in a number of ways — including with commercial general liability policies or fidelity insurance. Before acquiring an employee dishonesty insurance policy carefully consider all of your options. Also keep in mind that strong internal controls can greatly reduce your risk. JLK Rosenberger can help you establish a comprehensive risk-reduction program. For more information, call us at 949-860-9902 or click here to contact us.