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Guide

Why Employee Dishonesty Insurance Is A Must For Employers

Have you considered employee dishonesty insurance? Consider this option to protect your business ventures. Review the details via Fresh Insights.

 
How well can you trust your employees? While this may sound cynical, it's a fact that fraud and embezzlement are on the rise. According to the Association of Certified Fraud Examiners' 2012 Report to the Nations, small organizations with fewer than 100 employees experienced median losses attributed to fraud of $147,000, and are most commonly the victims of fraud instances.
 
When it comes to running a business, employees often are trusted to do the right thing with minimal oversight. This is why employee dishonesty insurance is a must for any business owner with staff. This policy provides affordable piece of mind so you can protect yourself from financial loss in the event of employee theft.

 

 

 

Why do I need this coverage?

Even with round-the-clock surveillance and tight accounting controls, it is still possible for a rogue employee to steal money, securities and other property from your business. Small businesses particularly are at risk because they do not have the resources to employ complete internal controls systems.
 
Despite the name, employee dishonestly insurance covers more than just theft by employees. It also protects employers from covered losses as a result of burglary or destruction caused by employees, and includes all current and former employees as well as partners, members, directors, volunteers, trustees, seasonal employees, and temporary persons under your management.
 
If you have a fiduciary, however, you will need to purchase a fiduciary bond as dishonesty insurance does not cover the risks specific to individuals handling other people's money. Additionally, you can add an endorsement to include ERISA compliance, which eliminates the need for a second ERISA bond.
 
Employee dishonesty insurance also is referred to as "crime coverage" and is analogous to a fidelity bond.

 

 

 

How much coverage do I need?

Estimating coverage needs can be tricky because it is hard to predict damage to your business from criminal activity. It also is dependent on the exposure risks and the needs specific to your business.
 
Although every company is unique, a good ballpark starting figure can be calculated by taking your business's annual volume and multiplying it by 20 percent. Most policies have starting coverage limits of $100,000; however, for nominal additional fees many companies can bump the coverage up to $500,000.
 
When shopping for a policy, you also want to look at how the insurance policy handles prior acts. Many insurance policies will only cover losses sustained within the duration of the insurance policy. Since fraud often can go undiscovered for extended periods, you may want to look into purchasing a stand-alone policy which will cover losses sustained during any point of your business's existence.

 

 

 

What isn't covered

Many employee dishonesty insurance policies typically exclude damage done by yourself and also situations where you could have foreseen a loss. Another major exclusion is accounting errors and losses from securities the company holds. Yet the coverage extends to partners, directors, members and trustees.
 
The vast majority of occupational fraudsters are first-time offenders and often in good standing with the company. As people are not always who they appear to be, for any business owner who does not work alone, employee dishonesty insurance is crucial to protecting the company.

 

 
To learn more about employee dishonesty insurance and how it can help your business, contact Cadence Insurance.
 

This article is provided as a free service to you and is for general informational purposes only.
Cadence Insurance makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article.
The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

INSURANCE AND INVESTMENT PRODUCTS:
Not Insured by FDIC | Not Bank Guaranteed | May Lose Value | Not Insured by any Federal Government Agency | Not a Bank Deposit

Cadence Insurance is an affiliate of Cadence Bank. Cadence Bank neither guarantees, nor is responsible for,
any obligations of, or any products or services offered or obtained by, Cadence Insurance.

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