Skip to Main Content

Employee Dishonesty Coverage

Wednesday, October 4, 2023
Employee Dishonesty Coverage

Employee theft is a reality that every business owner has to deal with. Workplace crime costs businesses in the US an estimated $50 billion per year. 1/3 of all business failures were caused by employee theft. This is where employee dishonesty coverage comes in regarding protecting your business from dishonest employees.

What is Employee Dishonesty Coverage?

Employee Dishonesty Coverage, also called Employee Theft Coverage, protects companies from financial losses caused by their employees’ dishonest or fraudulent actions. This coverage usually protects against theft of money, securities, or other valuable assets, as well as embezzlement, forgery, or any other fraudulent activity done by an employee to trick the employer for personal gain.

Employee Dishonesty Coverage is important for businesses of all sizes because it gives them a safety net in case an employee’s unethical actions cause financial damage. This helps to reduce the potential financial impact and keep the company stable.

What Does Employee Dishonesty Coverage Cover?

Employee Dishonesty Coverage typically covers various dishonest or fraudulent actions committed by employees that result in financial losses for the insured business. Some common aspects covered by this insurance include:

1. Theft of Money

This includes theft of physical currency, checks, or electronic funds from the employer’s premises or accounts.

2. Theft of Property

Employee Dishonesty Coverage can protect against theft or unauthorized use of the employer’s property, equipment, or assets.

3. Securities and Securities Forgeries

It extends to losses resulting from the fraudulent sale, transfer, or forgery of the insured business’s securities, stocks, or bonds.

4. Embezzlement

If an employee embezzles funds by misappropriating company money or assets for personal use, the coverage can come into play.

5. Forgery

Coverage often includes losses incurred due to the forging of signatures or documents by employees, leading to financial harm to the business.

6. Fraudulent Financial Transactions

This insurance can protect against financial losses resulting from fraudulent financial transactions initiated by employees, such as unauthorized wire transfers or unauthorized use of company credit cards.

7. Computer Fraud

It may also cover losses arising from computer-related fraud or cybercrimes committed by employees, like unauthorized access to sensitive financial data.

8. Fidelity Bonds

Some businesses may require employees with access to company finances or assets to be covered by fidelity bonds, a type of Employee Dishonesty Coverage.

What is Not Covered by Employee Dishonesty Coverage?

What is not covered can vary depending on the specific policy and insurer, but common exclusions may include:

1. Dishonesty Outside of Employment

Acts of dishonesty or fraud committed by employees in their personal lives, unrelated to their job duties, are typically not covered.

2. Acts of Non-Employees

Employee Dishonesty Coverage usually doesn’t apply to theft or fraud committed by individuals who are not employees of the insured business.

3. Bodily Injury or Property Damage

This coverage typically focuses on financial losses and may not cover bodily injury or physical property damage caused by employee dishonesty.

4. Criminal Acts

Acts of employee dishonesty that involve criminal activities, such as drug trafficking or other illegal activities unrelated to the job, may not be covered.

5. Dishonesty of Business Owners or Principals

Some policies exclude coverage for dishonest acts committed by the business’s owners, partners, or principals.

6. Errors or Negligence

Employee Dishonesty Coverage is designed to address intentional acts of dishonesty or fraud, so it may not cover losses resulting from employee errors or negligence.

7. Prior Knowledge

Suppose the employer had prior knowledge of an employee’s dishonesty or criminal history and still hired or retained the individual. In that case, the policy may not cover subsequent losses related to that employee’s actions.

8. Acts Committed After Termination

Coverage may not extend to dishonest acts committed by employees after their termination or resignation, as they are no longer considered employees at the time of the incident.

9. Non-Financial Losses

Employee Dishonesty Coverage is primarily focused on financial losses, so it may not cover non-financial damages or losses, such as damage to reputation.

How Does Employee Dishonesty Coverage Protect You?

Employee Dishonesty Coverage protects you by providing a financial safety net if an employee engages in dishonest or fraudulent activities that result in financial losses for your business. Here’s how it offers protection:

  1. If an employee’s dishonest actions, such as theft of money, embezzlement, or forgery, lead to financial losses for your company, Employee Dishonesty Coverage will typically reimburse you for the covered losses. This helps ensure your business doesn’t bear the full financial burden of the employee’s actions.
  2. Knowing that you have this coverage in place can provide peace of mind for business owners and management. It offers security, especially when employees can access financial assets or sensitive information.
  3. Employee dishonesty incidents can be disruptive and damaging to a business’s operations. This coverage helps your business maintain financial stability and continuity, allowing you to continue serving customers and meeting financial obligations even after a fraudulent event.
  4. If legal actions, such as lawsuits or investigations, arise due to the dishonest actions of an employee, Employee Dishonesty Coverage may assist in covering legal costs and expenses associated with defending your business.
  5. While not a direct coverage aspect, the financial support provided by this insurance can indirectly protect your business’s reputation. It helps you recover from financial losses, which can be crucial in maintaining your reputation and credibility in the eyes of customers, partners, and stakeholders.
  6. In some cases, Employee Dishonesty Coverage may be a requirement for certain industries or regulatory compliance. For example, businesses dealing with financial services or handling client funds may need fidelity bonds to meet legal requirements.


Employee Dishonesty Bonds vs. Crime Insurance

Employee Dishonesty Bonds and Crime Insurance are both types of insurance coverage designed to protect businesses from financial losses resulting from employee theft or fraudulent activities. However, they have some key differences in terms of coverage and purpose. Here’s an overview of each:

Employee Dishonesty Bonds

Purpose – Employee Dishonesty Bonds, also known as fidelity bonds or dishonesty bonds, are primarily designed to protect businesses against losses caused by dishonest or fraudulent acts committed by their employees. These bonds are often required for businesses that handle government contracts or work in industries with high fiduciary responsibilities, such as finance, healthcare, or government.

Coverage – Employee Dishonesty Bonds provide coverage for losses due to employee theft, embezzlement, fraud, forgery, or other dishonest acts. The coverage is typically tailored to job positions or employees with access to company funds, assets, or sensitive information.

Cost – Employee Dishonesty Bonds can vary depending on the coverage limits, the number of employees covered, and the industry’s risk profile. It is a one-time premium paid annually.

Crime Insurance

Purpose – Crime insurance, also known as fidelity insurance or commercial crime insurance, is a broader form of coverage that protects businesses from various types of criminal activities, not just those committed by employees. It encompasses employee dishonesty but also extends to cover losses caused by third parties, such as robbery, burglary, computer fraud, and other crimes.

Coverage – Crime insurance covers a wider range of criminal acts, including employee dishonesty, theft by third parties, forgery, extortion, and other criminal activities that can result in financial losses for a business. It offers more comprehensive protection against a broader spectrum of risks.

Cost – The cost of crime insurance varies depending on factors such as the coverage limits, the type of business, the location, and the security measures in place. Premiums are typically paid annually.

How Much Will Employee Dishonesty Coverage Cost?

Determining the cost of Employee Dishonesty Coverage can be influenced by a variety of factors unique to each business. The cost is often based on several key elements, such as the size of your workforce, the industry you operate in, the extent of coverage you need, and your company’s historical claims data.

In addition, the level of coverage and deductible you choose will also impact the premium. A business with many employees and a history of past incidents may see higher premiums, while smaller businesses with a clean track record might pay less. Working closely with an insurance provider to tailor a policy that suits your specific needs while staying within your budget is essential. In any case, the cost of Employee Dishonesty Coverage is a wise investment, as it can help safeguard your business from the financial repercussions of employee misconduct.

Example of Employee Dishonesty Claims

Employee dishonesty claims refer to situations where employees engage in fraudulent or dishonest activities that result in financial losses for their employers. These claims can lead to legal actions, investigations, and insurance claims. Here are a few examples of employee dishonesty claims:

  1. Embezzlement – Employees with access to company funds or financial records embezzle money over time. For instance, an accountant might manipulate financial records to siphon off company funds into their accounts.
  2. Inventory Theft – A warehouse or inventory management employee may steal products or materials from the company and sell them for personal profit.
  3. Data Theft – Employees with access to sensitive company data may steal or misuse this information. They could sell proprietary information to competitors or use it for personal gain.
  4. Vendor Kickbacks: Employees responsible for procurement or vendor relationships may receive kickbacks from suppliers in exchange for awarding contracts to specific vendors at inflated prices.
  5. Forgery: Employees might forge signatures on company checks, authorization documents, or contracts to divert funds or gain unauthorized access to resources.
  6. Credit Card Abuse: Employees with access to company credit cards may misuse them for personal expenses, such as vacations or shopping.
  7. Theft of Company Property: Employees may steal physical assets, such as laptops, office supplies, or equipment, and sell or use them for personal purposes.
  8. Payroll Fraud: Employees responsible for payroll processing may create ghost employees or manipulate payroll records to divert funds into their accounts.
  9. Misuse of Company Resources: Employees may misuse company resources, such as company vehicles, office space, or equipment, for personal use without authorization.

For further information about our Employee Dishonesty Coverage and its benefits, please don’t hesitate to contact us at (800) 383-8283. We’re here to give you full advice and help tailored to your needs.



Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.