What Is an Employee Dishonesty Policy?

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It is always nice to believe that your employees are 100% honest. Regardless of whether you are a small business, medium-sized business, or a large one, this is not always the case. Employees are human, and sometimes humans lie or steal. Employee theft and dishonesty is an unfortunate reality for some business owners that may be hard to comprehend. Especially if you are a small, family-owned business that treats your employees like family. It is challenging to face the reality that even if they are family, there is a possibility they will steal from you.

Employee Dishonesty insurance is a type of Commercial Crime policy that reimburses the business for losses due to employees committing acts of dishonesty. Even if you think your business is immune from this, it is better to be safe than sorry.

Who Needs Employee Dishonesty and Why?

Every single business, regardless of industry, should have an Employee Dishonesty insurance policy if you have employees. As a business owner, you have the responsibility of running your operations and making a profit while doing so. Imagine if an employee, one you trusted with your livelihood, was embezzling money for ten years and you didn't notice until now? Or if some petty cash turns up missing? Maybe a forged check is found. How would you replace the funds that have been lost by an employee committing the worst act against your business? Employee Dishonesty insurance will help you if something this devastating happens to you.

What Does Employee Dishonesty Insurance Cover?

While some insurance carriers will have different bells and whistles within their Employee Dishonesty policy, the standard coverages will include:

  • Theft - Stealing money from your business by way of just taking cash and unauthorized transfers are just some examples.
  • Forgery - If any of your employees, even managers, have access to any checks or bank accounts, this coverage is essential.
  • Alteration - If you send your employee to the bank to cash a check and they add a 0, they would be altering the check.
  • Credit Card Fraud - Whether a credit card belonging to the business, or charging a customer's credit card, the impact could be existential.

Why is it Important to Have Employee Dishonesty?

Employee Dishonesty insurance is one of the few types of Fidelity Bond insurance available for your business to cover the money. You have probably heard stories, or seen in the movies, about employees stealing small sums of money over some time so that it goes completely unnoticed until it is too late. Often, the business will just absorb the loss, sometimes causing bankruptcy and closing of the company. You have worked too hard and too long to have a successful business to be impacted by a bad employee. Regardless of the number of background checks you do, interviews you conduct, and time you spend with someone, you really never know what they may be capable of.

What is Not Covered Under This Policy?

It is critical that you always read your policy for inclusions and exclusions. A standard employee dishonesty policy will not cover:

  • Calculation errors or omissions - If the employee, or software used for accounting, makes a math error or omission, this will not be covered.
  • Vandalism - If you are concerned about your employees vandalizing or destroying your business personal property, look for this coverage elsewhere, on your Commercial Property insurance policy, or BOP.
  • Loss of income - Often an included coverage on many policies, you will not be paid for any loss of income affected by an act of employee dishonesty.

Are You Ready to Get Covered?

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