Crime Insurance Basics

When most business owners think about purchasing insurance to protect their operations, they typically consider general liability, professional liability, property insurance, or workers’ compensation. But there’s one critical risk that often goes overlooked—crime-related losses, especially those that happen from within the company itself.

Whether you’re a small business just starting out or a mid-sized enterprise expanding your team, it’s essential to understand what crime insurance is and how it protects your business assets.

In this article, we’ll walk you through the basics of crime insurance, explaining what it is, why it’s essential, and what it covers.

What Is Crime Insurance?

Crime insurance—sometimes referred to as commercial crime coverage or fidelity insurance—is a specialized policy designed to protect businesses against financial losses resulting from criminal activities. This may include theft, fraud, forgery, embezzlement, and other dishonest actions carried out by employees, customers, or even third parties.

Unlike general liability insurance, which primarily protects against claims of bodily injury or property damage caused by your business, crime insurance specifically targets risks involving theft or fraud. It’s particularly valuable because losses from crimes are often excluded from other standard insurance policies.

This coverage is critical for businesses that handle sensitive data, process payments, or rely on staff for financial duties—such as issuing checks, managing payroll, or transferring funds. Even with strong hiring practices and internal controls, fraud and theft can go undetected for months.

Why General Liability Insurance Isn’t Enough Protection

You might be thinking, “I already have general liability or property insurance. Isn’t that enough?” The short answer is no. General liability and property insurance policies typically exclude coverage for losses related to crime.

For example, if an employee embezzles funds or a hacker defrauds your company through a phishing scheme, general liability insurance won’t cover those damages. Crime insurance is uniquely designed to step in when criminal activity creates a hole in your business’s finances.

What Does Crime Insurance Cover?

The scope of crime insurance can vary depending on the policy, but most plans include protections against the following common risks:

Employee Theft

Unfortunately, employee dishonesty is more common than many business owners realize. Trusted employees may occasionally exploit their positions, leading to significant financial losses. If an employee steals money, property, or inventory, crime insurance ensures your company can recover the financial losses.

Forgery or Alteration

Crime insurance shields your business from losses caused by fraudulent activities, such as forged checks, counterfeit payments, or altered financial documents. For instance, if someone forges your company’s name on checks and cashes them fraudulently, your crime insurance policy can help compensate for the loss.

Social Engineering Fraud

Cybercriminals are becoming more sophisticated, leveraging phishing emails and other forms of social engineering to steal company funds or sensitive data. While cybersecurity measures are critical, crime insurance adds an extra layer of protection by covering financial losses tied to scams and hacking-related theft.

Theft of Physical or Digital Assets

Crime insurance covers physical theft of inventory, cash, or other valuables as well as theft of digital assets that may have monetary value, such as proprietary company data or software.

Third Party Crime

Not all threats come from within your organization. Crime insurance can cover losses caused by third-party criminals, such as break-ins, robbery, or an outsider manipulating your systems for financial gain.

What’s Typically Not Covered by Crime Insurance?

While crime insurance offers vital protection against many types of dishonest acts, it’s important to understand its limitations. Most policies exclude coverage for the following types of losses:

Crimes Committed by Employees After Their Dishonesty is Known by Employer

Once an employee is known to have committed theft or fraud, future losses tied to them are not covered under a typical crime insurance policy.

Indirect or Consequential Losses

Indirect or consequential loses, such as lost profits, business interruption, or damage to reputation—even if caused by a covered crime—are generally excluded by commercial crime insurance coverage.

Legal Fees

Legal expenses incurred in response to a crime are excluded under a crime insurance policy, unless the policy specifically includes legal expense coverage.

Costs Related to Preparing a Claim

Costs, such as accounting or investigative services related to preparing a claim are typically excluded from crime insurance—unless the policy provides an endorsement for claim preparation expenses.

Regulatory Fines of Penalties

Fines or penalties imposed by government authorities are excluded from most crime insurance policies.

Lost Income

Lost income, including employee salaries, commissions, fees, bonuses, and other types of income are generally not covered by crime insurance.

Case Study

Let’s take a look at a real-world example of how crime insurance can respond to a loss:

The Situation

A small accounting firm with ten employees relies on its long-time office manager to handle billing, bank deposits, and vendor payments. Over the course of two years, she quietly issued checks to a fake vendor account she controlled, siphoning off just under $150,000.

Because the payments were small and spread out—and the name on the fraudulent account resembled a real vendor—the fraud went undetected until a financial review uncovered discrepancies. By then, the funds had been long withdrawn, and the employee had resigned unexpectedly.

The Loss

Despite filing a police report, the firm was unable to recover the stolen funds through criminal proceedings. Their commercial property and general liability policies provided no coverage for this type of internal theft, leaving the business exposed to the full financial loss.

How Crime Insurance Responds

Fortunately, the firm understood crime insurance basics and had a commercial crime insurance policy in place. The policy included Employee Theft coverage up to $250,000 with a $2,500 deductible.

After an investigation and claims documentation, the insurance carrier reimbursed the firm for $147,500, allowing them to restore their operating cash flow and move forward without absorbing the full hit.

The Takeaway

Even trusted employees can exploit financial systems when controls are bypassed or stretched thin. In this case, because the firm understood crime insurance basics and had an adequate crime insurance policy in place, they avoided a six-figure loss and a potentially catastrophic blow to their financial health.

Key Takeaway

Crime insurance is a critical, yet often overlooked layer of protection that helps businesses recover from financially damaging acts like employee theft, wire fraud, forgery, and more. Understanding crime insurance basics is crucial to understanding how this coverage can safeguard businesses of all sizes.

Traditional policies like general liability or property insurance simply don’t cover these kinds of losses—leaving many companies exposed to risks they don’t even realize exist. Whether you’re running a professional services firm, healthcare operation, or retail business, the financial and reputational fallout from internal or external crime can be devastating.

Crime insurance provides the peace of mind that your hard-earned assets are protected, even when trust is broken or controls are bypassed. If you’re ready to take the next step, connect with a BR Risk Group™ Specialty Insurance Services, LLC advisor today. We’re here to guide you through selecting a solution that meets your business’s unique needs and ensures you’re fully protected against risks.