You may always want to assume the best in people, but sometimes employees can be a little bit less than honest. Maybe a few dollars disappear from your cash register, maybe some merchandise finds itself missing, or maybe the expense report that you left up to an employee is more than a little off each month. In any case, employee dishonesty insurance can be a great asset to your business, whether you’re in a particularly risky industry or you’re a small business that wants to prevent sticky fingers. Here’s how.
What is Employee Dishonesty insurance?
Employee dishonesty insurance is a type of crime coverage that can help you recover inventory and revenue should an employee jeopardize your business. Employee dishonesty coverage can also be known as discovery coverage or loss sustained coverage.
What is the difference between discovery and loss sustained coverage?
The difference between discovery and loss sustained coverage is mainly the amount of time that the policy will cover.
Loss Sustained Coverage
Loss sustained coverage can help a business recover any losses that were discovered specifically during the policy period. If the loss is discovered up to a year after the incident, and you’ve maintained your employee dishonesty policy, you could still receive a reduced payout amount for the damages.
Discovery coverage, however, can start covering the cost of a loss as soon as you notice it. Most policies will have a 60-day window before and after you cancel the policy to report a loss. However, it’s important that if you do have a discovery policy that you make sure the plan doesn’t have a retroactive date endorsement. To understand why, consider this scenario:
Employee A has been stealing money from your register for about 10 months. However, you’ve only started considering, or you’ve only had discovery coverage for about 5 months. If there’s a retroactive date endorsement and you noticed that your employee has been stealing money for 5 full months before you had the policy, your insurance carrier could only pay out the income lost from the point you received the policy onward (for the last 5 months that the employee was stealing).
If your discovery coverage doesn’t have that endorsement, then your carrier could reimburse you for the amount that the employee stole over the full 10-month period.
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What does employee dishonesty insurance cover?
A typical employee dishonesty policy could cover employee actions that fall under:
- Safe burglaries
- Computer fraud (i.e., hacking, phishing, putting a virus on your computer, and using a computer to get customer information)
- Credit card fraud
- Tampering with checks
- Fake invoices and receipts
As a business owner, you know that it takes all types of employees to run your business. So, it’s important to note that your employee dishonesty policy can also protect you against the actions of:
- Current employees
- Seasonal employees
- Former employees
- Independent contractors
- Directors & Officers
What’s special about employee dishonesty insurance?
You may have heard of a few other types of insurance that can protect your business from the actions of your employees. So, you may be wondering, “Why should I have employee dishonesty insurance specifically?” Well, here are some of the differences between those types of coverage and employee dishonesty.
Errors & Omissions coverage
Errors & Omissions coverage can be vital for a business that offers advice or where your employees are expected to be experts on a particular topic. It’s more for if an employee misspeaks or misrepresents your company. So, E&O insurance can cover mishaps where an employee may not have been acting maliciously, but they still had a slip of the tongue, were negligent, or gave some bad advice.
It happens to everyone, but in certain businesses, it can cost your clients money. So, if a client decides to sue your company for one of these reasons, Errors and Omissions coverage can help you cover the fees associated with the lawsuit, whether you’re found to be at fault or not. While this type of employee behavior can put you at risk, it’s not necessarily made for covering damages done by your employee to your business in particular.
Directors & Officers coverage
Directors & Officers coverage is more so used if someone makes a harmful claim against one of your business’s higher-ups. This type of coverage is made to help a company take care of legal fees if one of your officers is accused of:
- Sexual harassment
- Mismanagement of funds
- Deformation of Character
- And other employment practice liability issues
It can also help you defend that officer if they’re accused of stealing from a client. However, D&O coverage will more than likely not cover any physical damages to your business or reimburse your company if one of your directors has stolen from a company safe, embezzled money, or has written false checks. That type of revenue loss could be covered by employee dishonesty insurance.
Overall, employee dishonesty insurance can be a part of a comprehensive crime insurance policy or BOP. It could also be a separate plan altogether, depending on your current business insurance plan or insurance carrier. That’s why it’s important to talk to your agent about what your policy covers and how much it can reimburse you for.
Our experts are perfect at finding the right types of insurance to protect you from employee dishonesty. Whether it’s a separate policy, one part of a great crime insurance plan, or a vital part of a BOP, our agents will help you find the best rates on the business insurance you need. Call us today or fill out our online form to start comparing multiple, free quotes.