What Is Commercial Crime Insurance?

Losses due to crime are not covered by the vast majority of commercial property insurance policies, and your general liability coverage won’t cover them either. With crime insurance, your company is covered from many common forms of business crime, whether committed by your employees, your customers, your suppliers, etc.

Crime insurance policies can vary quite a bit from provider to provider, with each offering a slightly different set of coverages. In the most general sense, these break down to first-party and third-party coverages. First-party crime insurance covers losses to your business caused by a covered crime.

Third-party crime insurance covers accusations made by others (e.g., customers, vendors, or cleaning crews) that they suffered a loss due to a criminal act related to your company.

One common misconception about commercial crime insurance is that it’s mostly for larger companies or those that deal with a considerable amount of crime risk. The truth of the matter is far from that, as even very small businesses are well-advised to at least look into a crime insurance policy.

Generally speaking, you should pursue crime coverage if your company fits any of the following descriptions:

• Limited funds to invest in security measures
• Lacks a sophisticated security system
• Engages in regular transactions via cash, check, or credit/debit card
• Keeps inventory and products on-site
• Grants employees access to records and data

As you can see, these descriptions fit most small and mid-sized businesses, so crime insurance is certainly not just for “big business.”

There is a wide variety of potential claims that fall under the umbrella of a typical commercial crime insurance policy, but for the most part they fit into a few general categories. As you read through these categories, think about how much risk your company has for each of them.

• Dishonest employee actions: Every business owner wants to trust their employees, but the fact of the matter is, sometimes you get burned. Claims in this category include theft of money or property from your company—whether personal or business assets.

• Funds transfer fraud or computer fraud: If someone uses a computer to transfer funds away from your business in a fraudulent manner or to steal money, property, or securities, those claims fall under this category.

• Forgery or alteration: This category includes items like the forgery of checks and the altering of other financial instruments.

• Money: If any business cash, checks, securities, or other form of money is stolen from your company’s premises, your personal residence, or from your financial institution, those claims are covered under this category.

• Third-party property theft: If one of your employees is responsible for the theft of your customers’ money, property, or other assets, this coverage protects your business. (Note that the availability of this category of coverage varies by state.)

There are some crimes and crime-related incidents that are not covered by commercial crime policies though, and it’s smart to know what these non-covered claims are ahead of time. While this type of insurance does cover quite a few types of common business crimes, it typically does not apply in the following situations:

• Actions of owners, partners, directors, officers: Crime insurance policies do not cover criminal acts or acts of intentional dishonesty committed by any top-level management figures in your company. You’ll need directors and officers insurance for this type of coverage.
• Crime-related liability: While these policies do cover your own losses due to the events discussed earlier, they do not cover liabilities that you may have to other parties as a result of those losses.
• Accounting mistakes: Crime insurance does not typically cover errors made in your bookkeeping and accounting processes.
• Specialized occupations: There are certain industries that are not covered by commercial crime policies and instead need to seek out specialized policies. These industries include the legal field, the banking industry, and other such occupations.
• Data breaches and related liability: While the use of computers to commit fraud related to transferring or stealing assets from your business is covered by commercial crime insurance, cyber crimes related to data breaches are not. You can get coverage for this category by acquiring cyber liability insurance.
• Lost income: If your business loses income as a result of a crime, your commercial crime insurance policy will not cover that loss.
• Legal costs: Commercial crime insurance does not cover legal fees, settlements, or other legal expenses.

As you can probably imagine, the costs for commercial crime coverage vary considerably based on the nature of your business, the size of your company, the level of risk you’re exposed to, how strong your security systems are, and other factors. No matter what, it’s almost always much cheaper to acquire crime insurance as part of a business owner’s policy (BOP) or commercial package policy (CPP) than as a standalone policy.

While BOPs and CPPs save a decent chunk of money for any of the coverages available under those policy formats, that’s especially true for commercial crime insurance. Just as a rough guideline, you can often save 25%–50% by packaging crime coverage into a BOP or CPP as opposed to buying it separately.

Aside from simply covering your risks with crime insurance, wouldn’t you also like to take measures to prevent crimes from taking place to begin with? Here are a few tips to keeping your risk level as low as possible:

• Install security cameras on your property
• Install panic locks on any rear doors
• Keep a safe on your business premises
• Run background checks on employment applicants
• Train your employees on procedures for safe business operations
• Have a plan for what to do if there’s a robbery on-site
• Deposit your funds in the bank every day
• Check receipts against your bank deposits

There are quite a few entrepreneurs who operate under the misconception that commercial crime insurance isn’t necessary for small businesses. In reality, it’s arguably even more vital for small and medium-sized businesses that don’t have the resources to develop an extensive on-site security system, as opposed to a large corporation that has all the bells and whistles in regards to security.

Whether you decide to acquire commercial crime insurance or not, we hope this article answered all your questions about this type of coverage, and we wish you the very best with your business!