Although it’s said that honesty is the best policy, many companies should consider a different kind of policy — one that covers dishonesty. Employee theft/dishonesty coverage protects companies against the loss or damage of property by the unlawful taking of that property by an employee.
“Employers need to set in place proper procedures and documentations to protect against employee theft within their organizations,” says Rick Theders, CEO of Clark-Theders Insurance Agency. “Then, insurance is always an option — coverage that would respond if employee theft or dishonesty came into play.”
Smart Business spoke with Theders about how employers can protect themselves from employee theft and dishonesty.
Why should businesses consider purchasing employee theft/dishonesty insurance?
If you’re a business owner and your business is robbed, your property insurance would respond to that theft. But employee theft is not covered under property insurance policies. Instead, you need to purchase insurance that would respond to an employee who takes your property.
Typically, we think of embezzlement as the biggest area of concern. But theft of inventory or cash is also common, and that type of theft is typically a repeated occurrence. For example, an employee in a retail establishment might take $20 out of the cash drawer. If the employee gets away with that, a few days later, he or she might do it again. If that employee is still not caught, he or she might escalate the theft to $50. That same example holds true for people embezzling larger sums of money.
It’s immaterial if the theft is cash, check or misdirected deposit into someone else’s account. Employees have even directed credit card payments from business customers into their personal accounts through electronic bank activity. The insurance would respond to reimburse the business owner for that theft of money or property.
How can employers ensure they are protected?
Employers must have the necessary controls in place, but back them up. Make sure you do appropriate employee screening, check backgrounds, and if something still happens, that is why you buy insurance.
Insurance responds if something happens. But better pricing comes when the buyer acts proactively to protect businesses or homes by eliminating the possibility of loss. Someone with a perfect driving record ought to get a better price on car insurance than someone with two DUIs. The same thing holds true with precautions for employee theft.
Also, employers need to pay attention to the form of insurance they purchase. One type covers a claim ‘upon discovery,’ which would cover multiple thefts by an employee or group of employees. This would be considered one claim with one deductible. Another form covers claims on a per-theft basis, in which each theft would carry a separate deductible. It is very important to understand which form you have.