Businesses must account for many potential risks, including fire, vandalism, storm and wind losses. However, one that is often overlooked is crime that results in the loss of inventory, money and securities. Crime is more than just theft, which is generally covered by property policies, and fidelity insurance protects a broad variety of financial losses against a broad range of risks.
Fidelity insurance protects a company's money, securities and assets from criminal activity that might not be covered by a generic property policy. The insurance provides coverage for acts such as employee dishonesty, forgery, embezzlement, fraud and electronic or computer fraud. Coverage typically extends to money in transit and worldwide coverage, rather than just on the business property.
According to Insurance Hedge, 80 per cent of workplace crime is committed by employees. Also, according to The American Management Association, employee dishonesty accounts for 20 per cent of the nation's business failures. Fidelity insurance is a policy designed to protect against this threat. Acts of employee dishonesty are typically excluded from standard policies, and the business will be exposed to a large financial risk without a proper endorsement or a fidelity insurance policy.
Money and Securities
Money and securities are generally excluded or have a very low limits on standard business policies. They pose a great risk to an insurance company because of the opportunity for insurance fraud by lying about how much money was stolen. Fidelity policies are designed specifically to protect money and securities. The insurance actuaries price it accordingly, and in return, the clients get expanded coverage. You can review your current business policy to see if and how much coverage is provided for money and securities. Even if this coverage is provided, it is still important to review what it is covered for; employee dishonesty and the other risks might still be excluded, resulting in the need for fidelity insurance.
A fidelity bond protects a business against the dishonest acts of an individual person. Common people for which businesses buy fidelity bonds are treasurers or chief financial officers, because they have the most access to company funds. Because fidelity bonds are limited in who they cover, they are typically less expensive than purchasing a full fidelity insurance policy.
Why Buy Fidelity Insurance?
Insurance policies can be confusing. It might look like your business property policy has coverage for money and securities, but after closer review you can find that they are only covered on premises and only for direct theft. Fidelity insurance is meant to fill the gaps of your current insurance to provide a broad range of coverage.