Why Small Businesses Need Crime Coverage
In today’s complex business environment, small businesses face a wide array of risks that can threaten their financial stability. One often underestimated risk is crime, particularly theft by employees- even tenured and trusted ones. While many business owners assume their standard Business Owners’ Policy (BOP) offers sufficient protection, most BOPs provide only a small amount of coverage. It’s crucial for small businesses to understand the limitations of their current coverage and consider adding crime insurance.
The Limitations of Standard Business Owners’ Policies
Most BOPs provide limited coverage for employee theft, typically capping coverage at around $25,000. While this may seem sufficient for minor incidents, the reality is that thefts often go undetected for extended periods, leading to significant losses that far exceed this limit. For instance, in one case, employees of a high school stole over $500,000 over 5 years1. In a second case, an employee embezzled $162,000 from a Western New York medical office2. Such losses can devastate a small business, highlighting the inadequacy of standard BOP coverage.
Understanding Crime Insurance: Beyond Employee Theft
A standalone crime insurance policy goes beyond the basic coverage provided by a BOP, offering protection against a broader range of criminal activities. Here’s a closer look at the key insuring agreements that may be selected on a crime policy and the types of coverage they provide:
- Fidelity Coverage: Protects against employee theft, including theft of client property and ERISA coverage for retirement plans.
- Forgery or Alteration: Covers losses from forged or altered outgoing negotiable instruments, such as checks.
- On-Premises Coverage: Protects against theft or criminal destruction of property on the premises.
- In Transit Coverage: Offers protection for money and securities while in transit, whether with an employee or an armored vehicle service.
- Computer Crime: Includes coverage for losses due to computer fraud and the associated costs of restoring damaged software and data.
- Funds Transfer Fraud: Protects against unauthorized transfers from the insured’s accounts.
- Social Engineering Fraud: Covers losses from deceitful manipulation, such as cases where businesses are tricked into sending payment to a fraudster, resulting in a significant financial loss.
Protecting Your Business: The Need for Adequate Coverage
Even with stringent internal controls, no business is entirely immune to the risk of crime. The examples above illustrate the wide range of threats that can jeopardize a company’s financial health. Investing in comprehensive crime insurance is not just about mitigating risk; it’s about ensuring the long-term sustainability of your business.
For small businesses, particularly those with limited resources to absorb significant losses, the peace of mind that comes with adequate crime coverage is invaluable. By working with a knowledgeable insurance agent, you can tailor a policy that addresses your specific risks, ensuring you’re not caught off guard by the limitations of a standard BOP.
Conclusion: A Proactive Approach to Crime Coverage
In an uncertain economic environment, where businesses are increasingly vulnerable to various forms of crime, it’s essential to take a proactive approach to your insurance needs. By understanding the limitations of your existing coverage and exploring crime insurance options, you can protect your business from potentially devastating losses. Don’t wait until it’s too late—speak with an insurance professional today to ensure your business has the protection it needs.
For more information on crime coverage and how to protect your business, contact us at Sellers Insurance. Email us at [email protected] or call us toll-free at 1-800-333-5440.
1 https://www.nytimes.com/2018/08/14/nyregion/connecticut-school-cafeteria-theft.html
