What is 'Business Crime Insurance'

Business crime insurance is an insurance policy that companies purchase to ensure protection from losses resulting from business-related crime. Protection can cover merchandise, money or other property loss when a company is victimized by someone perpetrating embezzlement, forgery, robbery, securities theft or another form of business-related crime.

BREAKING DOWN 'Business Crime Insurance'

Business crime insurance exists because most commercial property policies do not cover crime-related losses. Companies can invest in business crime insurance either as part of a larger insurance package, typically known as special multiperil insurance or a commercial package policy, or they can purchase separate standalone policies to address and provide coverage for specific types of crime. The advantage of having a separate standalone commercial crime insurance policy is that it allows you to customize coverage for specific needs of your business. In any case, it is important to remember that business crime insurance isn’t something automatically covered in a commercial package policy without specifying its inclusion.

Business crime has become a substantial source of liability for companies. According to the Association of Certified Fraud Examiners, fraud and abuse costs U.S. organizations more than $400 billion annually. In addition, the average organization loses over $9 per day per employee to fraud and abuse and about 6 percent of its total annual revenue to fraud and abuse committed by its own employees. With technological developments in business operations growing at a rapid pace, small business owners are becoming more and more prone to fraud involving computers. Moreover, as businesses adjust to a leaner corporate culture in general, companies are downsizing and being involved in takeovers, which can increase the probability of employee dishonesty, theft and third-party fraud. Although many small business owners have solid internal controls, there’s always a possibility that these controls can be breached by third parties or even employees.

Commercial crime insurance is important for many small businesses, but it is especially important for those businesses that deal in cash, checks, online payment systems and credit cards. Limits are typically specified and distinguished for on and off-premises losses. Protection may cover property, merchandise, cash or securities.

Example of ‘Business Crime Insurance’

A business owner would benefit from a business crime insurance policy in the event that a robber stole cash or an employee stole inventory. The avoided losses also include a time savings, because working through crime losses not only takes money, but also time. 

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