For your best business protection and savings, we recommend bundling GL with some other important coverages on one Business Owners Policy!
Employee dishonesty refers to any fraudulent activities that an employee (and their colleagues) conjures while in the workplace, often resulting in financial losses. Dishonesty in the office comes in different forms including embezzlement, forgery, theft, and more. To protect itself from the financial repercussions of such acts, a company secures employee dishonesty insurance.
Also known as the employee dishonesty bond, employee dishonesty insurance is an essential coverage in a commercial crime insurance policy. It's underwritten for small businesses and can be provided based on an employee's position, per person, or case-to-case basis. The insurance covers various workers, including:
The Association of Certified Fraud Examiners reported that companies lose 5% of their yearly revenue due to fraudulent activities and theft. Additionally, the US Chamber of Commerce indicated that 30% of business failures stem from employee dishonesty.
While it's critical for every company to have employee dishonesty insurance, there are particular companies that would benefit more from the coverage.
Financial institutions are at exceptionally high risk of theft and fraud because employees handle the company's and customers' financial assets. They handle large sums of money, and one can easily be tempted to steal or manipulate financial records.
Other large companies offer social security services, retirement and disability insurance, and other social survivor benefits. Funds, such as pensions, are monies that increase the risk of fraud and misappropriation. Purchasing ERISA employee dishonesty coverage protects social security agencies and other companies managing employee benefit plans from such losses.
In many SMBs, managers and directors are often in a position to access the companies' financial accounts. If any of them plans to embezzle funds or engage in fraud, business assets get exposed to risks. In such a case, a company may purchase employee dishonesty crime insurance per position.
Employee satisfaction and performance are not metrics to gauge staff trustworthiness. In fact, one in four employees who commit dishonest acts has been serving their employer for over a decade.
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There are two types of employee dishonesty insurance: loss sustained and discovery base coverage. They defer in the incidents that trigger the policy and the risks that each covers:
Discovery base coverage - This policy only protects against losses discovered during the insurance period. Therefore, it doesn't consider when the action took place. The focus is on when the dishonest act is discovered.
Loss sustained coverage – The loss sustained coverage offers protection for all the losses suffered while the policy is still active. A good policy provides an extended discovery period in which the policy remains active and offers coverage.
A blanket dishonesty bond is a type of fidelity bond that protects a company against losses due to employee dishonesty. Also known as commercial blanket bonds, the coverage primarily prevents small businesses from going bankrupt because of the unbecoming acts by an employee or a group of employees.
Employee theft bond provides coverage for a range of staff misconducts, including:
Theft of money or securities – This coverage offers protection when an employee steals money, whether by taking cash, authorizing unapproved transfers, or manipulating financial records.
Forgery - Sometimes a staff member may forge financial papers, such as checks, drafts, and promissory notes, to benefit financially at the expense of a company. Other times, an employee may alter the amount indicated on a check for selfish gains. In such cases, an employee theft bond will cover you.
Embezzlement – Employees with access to checks, bank accounts, and companies' assets have a fiduciary duty to protect those assets and use them according to the laid down policies. Any case of misappropriation can lead to huge losses. A good employee dishonesty policy covers the expensive losses caused by fraud and embezzlement.
Credit card fraud – When personnel use a client's credit card or charges their employer's credit card account to fraudulently debit money to their personal account, it tarnishes a company's reputation. If your company handles customers' credit card information, you need a policy that protects you against credit and debit card fraud.
Employee dishonesty insurance starts with a $100,000 minimum policy limit. The maximum limit is $1 million or $2 million depending on how the insurance company underwrites its employee dishonesty coverage.
Just like other coverages, employee dishonesty insurance doesn’t offer the absolute protection that businesses need. It has exclusions. The following are perils that employee dishonesty coverage doesn’t cover:
Employee dishonesty coverage doesn’t treat volunteers as employees. And so, any dishonest acts volunteers commit resulting in losses for the company or organization isn’t covered. For this reason, non-profit organizations and government entities don’t usually decide to get employee dishonesty insurance.
Some carriers cover volunteers by allowing endorsements in the policyholder’s employee dishonesty insurance. This is usually done by adding volunteers as additional insureds. Once volunteers are added, coverage works the same way as it would for permanent or contractual employees.
Let’s say you’re running a cyber security business. One of your employees uses the company’s network to gain illegal access to a state-owned website. Authorities found out about this and seized the computer and the other tools used to do the crime. Will employee dishonesty provide coverage in this case? Absolutely not.
Employee dishonesty crime insurance doesn’t reimburse equipment seized by authorities, which were used by an employee for a crime. But note that if your business is pulled into the mess, then the coverage can take care of legal fees.
Fraud, theft, and misrepresentation that an employee commits can halt business operations. But note that an employee dishonesty insurance policy doesn’t provide coverage if this happens. Understand that employee dishonesty only helps you recover the damages that resulted from an employee’s acts. It won’t help your business cover losses if such an act results in your business having to pause for an indefinite period of time to reverse the damage done.
Note that your carrier won’t provide coverage to employees convicted of committing a crime in the past. This is only applicable if the employee has a record of a criminal offense. In case, such crime is only hearsay or hasn't been taken to court, then employee dishonesty can still provide coverage to the employee.
In case of a joint project and another company’s employees commit fraud, theft, and other related acts against your company, understand that employee dishonesty insurance won’t provide coverage to the losses you’ll incur.
The reason is simple, such employees are only working with you and not working for you. They’re not part of the payroll nor are such employees part of your business’s organizational structure.
But note that you can endorse a third-party employee dishonesty coverage to your existing policy. With this, the crimes of another company’s employees can be covered. Usually, the endorsement is done by adding such employees as additional insureds.
Crimes that an employee commits against your business during war aren’t covered by employee dishonesty insurance.
Employee dishonesty insurance won’t reimburse losses if an employee gives defamatory statements against your company. Understand this insurance only includes theft, misrepresentation, and other fraudulent acts. Consult your carrier and ask whether you can add slander or libel to your existing employee dishonesty coverage.
Employee dishonesty insurance will only provide coverage to an employee’s theft, fraud, misrepresentation, and other related acts that have been reported to the authorities. Carriers require the policyholder to provide a copy of a formal complaint as proof. With that said, even though an act is covered, the policyholder can’t get coverage for losses if it’s not reported.
Although you may have the coverage of an employee theft bond, the best way to protect yourself is to alleviate these risks and exposures in the first place. That means creating policies and procedures designed to ensure zero dishonesty amongst employees.
The following are some effective preventive measures:
Performing pre-hiring background checks of prospective employees
Tasking another party (other than the employee who manages the accounts) to reconcile bank accounts
Countersignature requirements for bank checks
Conducting internal audits for all financial records and assets
Hiring an independent accountant to perform annual company audits
Buying employee dishonesty insurance (fidelity bond)
Employee dishonesty coverage is often referred to as a fidelity bond. As mentioned before, it protects businesses from financial losses caused by employees' dishonest acts and misconduct.
The Employee Retirement Income Security Act (ERISA) sets the policies and regulations governing businesses that manage employee benefit funds and social security insurance policies. An ERISA fidelity bond is insurance coverage designed to protect companies managing these employee benefits accounts from losses caused by dishonest and fraudulent actions of employees who handle and manage these funds.
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Employee dishonesty insurance coverage is inexpensive. However, the rates vary from one insurance carrier to another depending on many factors. They include:
The sector in which you operate
Annual sales margins
Fraud and theft prevention measures
Value of company equipment and assets
Insurance policy limit
Small businesses get the minimum $100,000 employee dishonesty coverage and pay $43 a month or $516 a year. Note that your rates will be the same or slightly differ as per the factors we mentioned above. Contact your insurance company/agent for personalized insurance quotes.
To add, the table below shows the best carriers for employee dishonesty coverage:
| ||Cost per Month||Cost per Year||Best for|
|CoverWallet||$33||$396||Employee dishonesty insurance quotes comparison online|
|Thimble||$37||$444|| Employee dishonesty insurance that can be added to short-term general liability insurance |
|Hiscox||$44||$528|| Continuous employee dishonesty insurance |
To get the best employee dishonesty insurance, it would be best to collect quotes. Compare employee dishonesty insurance quotes by clicking the "Get Quotes " button at the top of this page to get the offers of the best insurance carriers.
Carriers offer employee dishonesty insurance as a stand-alone policy or as a packaged policy in crime insurance. Almost all small business insurance carriers offer this coverage. Nonetheless, the following are the best employee dishonesty insurance companies based on third-party reviews and online ratings.
Manage your policy online
Covers all kinds of businesses
Has very few exclusions
Vandalism isn’t covered
CoverWallet offers the crime insurance quotes of its partners. Employment dishonesty coverage is included in the crime insurance policies that this company sells. Employee dishonesty coverage from CoverWallet covers contractors, full-time employees, and third-party employees. Perils included in its policy are theft, fraud, and more.
CoverWallet determines the price of your crime insurance with employee dishonesty coverage through the following criteria:
Number of employees
Presence of office security devices
Value of equipment your business uses that’s easy to steal
Policy limits and deductibles
Best for: Employee dishonesty insurance quotes comparison online
Average cost: $33 per month
Our rating: 10/10
Can be added to Thimble’s short-term liability insurance
Thimble’s employee dishonesty coverage isn’t available to all kinds of businesses
Thimble’s employee dishonesty insurance can be added to its short-term general liability coverage for small businesses. Thimble doesn’t underwrite its employee dishonesty coverage. Furthermore, you’ll have to contact the company’s customer support to ask whether or not your business qualifies for the coverage.
Best for: Employee dishonesty insurance that can be added to short-term general liability insurance
Average cost: $37 per month
Our rating: 9/10
No need to renew your employee dishonesty coverage
Can be canceled anytime
Social engineering frauds aren’t covered
Hiscox’s employee dishonesty coverage is packaged in its crime insurance policy. Employee dishonesty coverage from this carrier include the following perils:
Furthermore, Hiscox’s employee dishonesty coverage also covers the cost of notifying concerned stakeholders as well payments to witnesses if any are required to settle the matter in court.
Note that Hiscox crime insurance with employee dishonesty coverage can be availed as a continuous policy. This means that there’s no need to renew your insurance. Once purchased it remains claimable so long as you pay premiums on time and don’t do anything that will terminate the policy.
Best for: Continuous employee dishonesty insurance
Average cost: $44 per month
Our rating: 8/10
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Policy Type: Business Insurance
Company name: CoverWallet Business Insurance
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