No business wants to hire dishonest employees. However, you can’t know who a person is based on meeting them once or twice. Theft doesn’t happen right away, but is one of many types of business liabilities. Employee dishonesty coverage can help if you find yourself in a scenario where an employee deliberately sabotages your business. From there, you can take disciplinary action against the employee in question and get reimbursed for what was taken.
Small, medium and large businesses can fall victim to employee theft or fraudulent acts. It can affect your small business's health equity. No one is safe in the sense that people are unpredictable, and as much as we want to see the best in others, no one is perfect. That’s why you’ll want to ensure your insurance policy covers you when this happens. With that said, let us explain employee dishonesty coverage so you can protect your business.
Explaining employee dishonesty coverage and what’s covered
Employee dishonesty refers to any fraudulent or dishonest acts by employees. There are multiple ways for an employee to be dishonest with a business. Here are some of the common forms of employee dishonesty covered by employee dishonesty coverage:
Misappropriation of cash
Cash theft, revenue skimming, fraudulent cheques, inaccurate payroll expenses and altered invoices are all forms of cash misappropriation. In basic terms, this form of dishonesty is considered employee theft in terms of cash. If a worker steals money from an organization, it causes it to suffer financial losses.
Misappropriation of inventory
Stealing inventory, unauthorized use, fraudulent sales and write-offs are considered inventory misappropriation. This occurs when an employee either steals inventory, uses it for personal reasons, or purposely damages it to write it off. If you aren’t a service-based business, this can spell trouble. Having business property insurance is helpful in this situation.
Misappropriation of other assets
Misuse and unauthorized use of equipment, computer systems and company cars is called misappropriation of other assets. If an employee uses company property without permission for personal use, they risk damaging the assets that you need to run your business. Cyber insurance can be helpful if your business uses computer systems to store data.
Corruption
Self-dealing transactions, conflicts of interest, bribery and bid-rigging are all types of business corruption. If someone is taking advantage of your business for their own personal gain, it’s considered corruption. Be aware of this happening because it can be detrimental to your business.
Financial fraud
Deliberate misstatements or falsification of financial or non-financial statements are forms of financial fraud. If an employee working for you is making accounting errors on purpose, they likely have a hidden motive that will not benefit your business. This is especially true when it comes to large businesses that also require policies like construction contractors insurance.
Discovering employee dishonesty is always a disappointment because you trust your employees to act in the best interests of the business. However, understanding the different types of employee dishonesty will help you recognize the issues before they worsen. On the other hand, employee dishonesty coverage can help you out if one of these things happens to you. Next, we will get into everything you need to know about employee dishonesty coverage.
Protecting your business with employee dishonesty coverage
Having basic business insurance is important. However, you might also want to have an employee dishonesty insurance policy to keep your business safe from financial losses. This commercial crime insurance policy will assist you in various business claim scenarios. With that in mind, let’s review how you can protect your business from employee dishonesty:
Have a procedure to report employee theft or other forms of dishonesty
You should be prepared in case employee theft occurs in any way. You might not notice what’s happening when you’re busy running your business, but another employee might. That’s why you should have a confidential way for workers to report employee theft or other forms of dishonesty.
Occasionally conduct surprise audits
Make your employee dishonesty coverage cost-effective by conducting surprise audits from time to time. It will allow you to get used out of your crime insurance if needed in the sense that it will reveal whether or not all the money is here. Even temporary employees could steal from the cash register.
Test employee knowledge of fraud and fraud awareness
It’s important to review your code of conduct with your employees. It will instill a sense of ethics and teach them how to recognize if a crime is occurring within this business. This can be helpful for a business owner because workplace crime can sometimes go unnoticed.
Use an external auditor
Consider bringing an external auditor to find out if one or more employees are involved in a crime against your business. Paying these professional fees will give you comprehensive data and statistical analysis. This is helpful in large businesses where it’s easier for criminal acts to go undetected.
Having a commercial crime insurance policy can be helpful in the event your employees do steal from you. It gives you the coverage you need to make up for financial losses suffered as a result of employee dishonesty. However, you should still monitor things on your own because you work hard to keep your business going and shouldn’t have that taken away from you. Next, we will explore the types of available employee dishonesty coverage options.
Employee dishonesty and crime insurance options
In the event an employee commits a dishonest act, either alone or conspiring with others (excluding business partners), employee dishonesty insurance coverage will protect your business. Having an up-to-date insurance policy is essential whether you run a large-scale or small business. There are two main types of coverage available:
Commercial blanket bond
If one or more employees are involved in a criminal act against your business, a Commercial Blanket Bond can help you out. It compensates you up to a maximum limit no matter how many employees are involved. This is helpful if you run a large business with several employees.
Blanket position bond
When only one employee is dishonest, this dishonesty coverage can assist you. You can pay a certain amount through reasonable professional fees to ensure each employee you have. This option makes more sense for small businesses with fewer employees.
It’s important to know that employee dishonesty coverage will not be available to everyone working for you — it’s only valid for certain positions. However, employee dishonesty coverage can often also be extended to include fraud perpetrated by volunteers or directors so all businesses can ensure they are properly covered. Choosing the right policy is essential no matter what type of business you run. After all, you wouldn’t want to lose everything you worked so hard for.
Contact BrokerLink today!
Having crime insurance is vital for any business. Life is unpredictable, and you never know what will happen. By being properly insured, you will not suffer the financial losses associated with paying out of pocket in the event that something happens to your business.
Protecting your business from employee dishonesty includes having the right business insurance coverage in place. Call your BrokerLink broker today to discuss your current coverage or to get help finding the coverage that is right for you.
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