Does Business Insurance Cover Theft?

If you're looking to protect your business from the unfortunate but real risk of theft or fraud, you need to look beyond typical business owners and general liability policies.
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Does Business Insurance Cover Theft?

Written by Brian Greenberg
CEO / Founder & Licensed Insurance Agent

Last updated: November 29th, 2022

Reviewed by Paige Geisler
Licensed Insurance Agent

Even for those who pay for commercial property insurance to protect against certain types of property theft, commercial crime insurance is essential for any business owner wanting to cover stolen cash or employee theft.

What Is Business or Commercial Crime Insurance?

Business or commercial crime insurance helps protect companies from financial theft and other types of unsavory fraudulent criminal activity conducted by employees or outsiders. This type of coverage can even help with instances of fraud or theft where employees and third parties work together.

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What Does Business Crime Insurance Cover?

Business crime insurance covers some of the gaps inherent in general liability and commercial property coverage.

The main areas of coverage include:

  • Employee theft and employee fraud
  • Stolen cash or property, whether by employees, customers, or burglary/robbery
    Unauthorized funds transfers
  • Forgery
  • Check fraud
  • Payroll fraud
  • Embezzlement
  • Coverage against theft while workers are traveling or outside of your typical business’s property location

What Does Business Crime Insurance Not Cover?

While it does fill in the gaps of employee theft and certain types of fraudulent activity, business crime insurance often doesn’t cover certain indirect losses, owner theft, or certain cybercrimes.

More specifically, exclusions may include:

  • Losses resulting from data breaches
  • Loss of intellectual property, data, and business secrets such as patents, client lists, and business plans
  • Damages or theft by business owners, executives, or partners
  • Associated income loss
  • Legal and investigative fees

Is Theft Covered by Most Business Insurance Policies?

Typically, the most common types of theft aren’t included in business insurance policies. Theft of equipment or physical assets (not cash) located on the business’s property may be covered by commercial property insurance when it’s due to a robbery or burglary. However, this doesn’t include any type of employee theft or theft of financial assets.

Does Business Insurance Cover Employee Theft?

Typical business insurance doesn’t cover employee theft. Business crime insurance, on the other hand, does. However, these policies usually come with some provisions.

A subtype of crime insurance called fidelity bonds is designed more specifically to cover losses due to employee fraud and can include customer or client reimbursement to compensate for damages due to crime. Fidelity bonds typically have lower coverage limits than business crime insurance.

Does Your Business Need a Crime Insurance Policy?

Whether your business needs a crime insurance policy is up to you and your business type and industry. Some business types are at higher risk of employee or cyber theft than others.

According to some surveys, employee theft affects approximately three out of every four businesses in the United States.

Here are a few factors that may put you and your business at higher risk of theft or fraud:

  • Having physical inventory that’s handled by employees, especially by part-time or seasonal employees, contractors, or employees who work or travel off-site with company inventory
  • Having expensive equipment (either as part of business operations or product inventory)
  • Handling large amounts of electronic transactions or customer data
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Key Takeaways About Business Insurance Policies for Theft

Because many factors are at play in choosing the right amount and types of business crime insurance coverage, it’s best to speak to a licensed insurance agent to discuss the business policy combinations for your specific needs, exposures, and risks.

You will want to look into subtypes or enhancements to your current policy if options such as cybercrime liability insurance or fidelity bonds are right for you. You will also need to decide if you would like your policy to cover only crimes that occur and are discovered during your coverage period, through what is called loss sustained coverage, or if you would prefer discovery coverage that covers all theft discovered during your coverage period, regardless of when it occurred.

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