Commercial crime insurance covers financial losses resulting from criminal acts committed by employees or third parties. Coverage includes employee theft/dishonesty, forgery or alteration, computer fraud, funds transfer fraud, money and securities theft (inside and outside premises), and social engineering fraud. Fidelity bonds — a related product — specifically cover employee dishonesty and are often required by contract or regulation.
Any business that handles money, securities, or valuable property. Financial services firms, banks, and insurance companies are often required to carry fidelity bonds by regulators. Nonprofit organizations handling donor funds, property management companies handling tenant deposits, and ERISA plan fiduciaries all need crime coverage. Businesses with employees who have access to company funds, bank accounts, or financial systems are at risk.
Crime policies provide per-loss or per-occurrence limits for various coverage insuring agreements. Employee theft is typically covered on a 'discovery' basis — the policy in force when the loss is discovered responds, regardless of when the theft occurred. Social engineering coverage (increasingly critical) covers losses from fraudulent emails, phone calls, or impersonation schemes that trick employees into transferring funds. Computer fraud covers direct losses from unauthorized access to computer systems.
Crime insurance limits range from $250K to $10M per insuring agreement. Employee theft limits are typically $1M-$5M. Social engineering sub-limits are often $100K-$500K with higher retentions. Deductibles range from $5K to $50K. ERISA fidelity bond requirements mandate coverage of at least 10% of plan assets (up to $500K for standard plans, $1M for plans holding employer securities).
A company's controller embezzled $1.4M over three years through fictitious vendor payments and manipulated bank reconciliations. The crime policy's employee theft insuring agreement covered the full $1.4M loss after a $25K deductible. The investigation and recovery costs of $180K were also covered under the policy.