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Commercial Crime Insurance 101

Every company, regardless of size, is a potential target for crime, whether from outside or even inside the company. Commercial crime insurance protects an organization from financial losses related to theft, fraud, forgery, and other types of criminal activity against the organization. Proactive anti-fraud measures are important for preventing crime, but some crafty criminals still get around them. That’s where crime insurance comes in.

Employees inside the organization, especially those with access to bank accounts or sensitive inventory, are one of the most common perpetrators of commercial crime. A crime policy will cover losses related to theft, willful property damage, forgery, embezzlement, or fraudulent changes to the organization’s computer system by employees, no matter what their position.

It is important to take preventive measures to prevent employee criminal activity, including background checks, making sure multiple employees have access to all systems, and training everyone on what is normal procedure, so they can spot if something looks amiss.

Crime insurance also covers losses related to criminal activity by people outside the company. This includes robbery at a physical location, an outside hacker getting into the computer system or bank accounts, or a customer attempting to pay in counterfeit funds.

Crime insurance policies usually are issued on a named perils basis, meaning that the policy clearly lists which types of losses it will cover. Go over your policy language carefully with your broker to ensure that your policy has not left out any types of crime your business could be vulnerable to.

Most policies set deductibles and coverage limits per covered event rather than an aggregated limit covering all incidents. However, multiple incidents committed by the same person or criminal group are usually considered a single loss with a single deductible and limit, even if it takes a while to figure that out.

There are two common types of loss triggers written into crime insurance policies. The most comprehensive one is a loss discovered form, which means the policy will cover any incident that took place during the policy term, even if the insured doesn’t discover the loss until weeks or months after the fact. This is particularly useful for financial and cyber crimes, which can fly under the radar for a while, particularly if only one or two employees have access to a particular system.

The other type of coverage trigger is a loss sustained form, which means the policy will only cover the incident if reported when it took place. Be careful to read your policy language to be completely sure what is and isn’t covered, and don’t be afraid to ask your broker if you have questions.

There are some things crime policies typically don’t cover. These include repeat crimes by an employee after the employer already knows about the first incident, incidental income losses due to business interruption, fire damage, and any legal expenses.

Don’t overlook commercial crime insurance. General property and liability policies (or a business owner’s policy for smaller businesses) don’t usually provide enough coverage to truly protect a business from costly crime-related losses. Kamm Insurance Group can help you review crime insurance options to cover your vulnerabilities with limits high enough to protect your organization.


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