In business, it’s easy to focus on external risks like lawsuits or natural disasters, but employee dishonesty or financial fraud are internal threats that can be just as damaging. Fidelity and crime insurance offers essential protection against these types of losses, whether they stem from within your organization or from external schemes. At Rollo Insurance, we recognize that protecting your assets starts with preparing for the unexpected. We’re here to help Texas businesses strengthen their defenses and ensure long-term stability.
What is Fidelity and Crime Insurance?
Fidelity and crime insurance is a type of business insurance that covers losses of money, property, and other assets due to criminal acts. These acts can be committed by people working for you or by external criminals.
While the terms “fidelity” and “crime” are often used together, they traditionally focus on slightly different aspects of criminal activity:
- Fidelity (or Employee Dishonesty) Insurance: Primarily protects your business from financial losses caused by your own employees’ dishonest acts, such as theft, embezzlement, or forgery.
- Crime Insurance (Commercial Crime Policy): Provides broader coverage that can include employee dishonesty, but also covers criminal acts by third parties (non-employees) such as robbery, safe burglary, forgery by outsiders, computer fraud, and social engineering fraud.
What Are Unique Risks Covered by Fidelity and Crime Insurance?
Even with strong internal controls, no business is entirely safe from occupational fraud. This insurance addresses risks like:
- Employee Theft/Dishonesty: An employee stealing cash, inventory, or diverting company funds.
- Forgery or Alteration: Someone forging signatures on checks, manipulating financial documents, or creating fake invoices.
- Theft of Money and Securities: Loss of cash or valuable papers due to robbery or burglary.
- Computer Fraud: Unauthorized access to your computer systems to steal money or property.
- Funds Transfer Fraud: When criminals trick an employee into wiring money to a fraudulent account.
- Social Engineering Fraud (Impersonation Fraud): When criminals deceive an employee (e.g., through a fake email appearing to be from a CEO) into transferring funds or giving out sensitive information.
- Counterfeit Currency: Accepting fake money that results in a loss.
- Credit Card Fraud: Losses from fraudulent credit card use.
- Extortion: Losses due to threats against your property or loved ones.
Why Does Your Business Need Fidelity and Crime Insurance?
Fraud and theft can happen to any business, large or small, at any time. The median loss from occupational fraud can be substantial, and many victims recover nothing. This insurance is crucial because:
- External Sophistication: Criminals are becoming increasingly sophisticated with scams like social engineering and computer fraud.
- Protecting Assets: It safeguards your money, inventory, equipment, and other valuable assets.
- Maintaining Trust: If your business handles client money or assets, this coverage can provide reassurance to clients that their funds are protected.
- Legal/Contractual Requirements: Certain industries (especially financial services) or contracts may require you to carry this type of coverage.
What Does Fidelity and Crime Insurance Cover?
A comprehensive commercial crime policy can include various types of coverage, often called “insuring agreements”:
- Employee Dishonesty Coverage: This is the core “fidelity” part. It protects your business from financial losses directly caused by dishonest acts of your employees, whether through theft, forgery, or embezzlement.
- Forgery or Alteration Coverage: Protects against losses from forged or altered checks, bank drafts, promissory notes, and other financial documents.
- Theft, Disappearance, and Destruction of Money and Securities (Inside & Outside the Premises):
- Inside: Covers loss of money and securities from theft, disappearance, or destruction while on your premises.
- Outside: Covers loss of money and securities from theft, disappearance, or destruction while outside your premises (e.g., in transit to the bank).
- Computer Fraud Coverage: Protects against losses due to unauthorized access to your computer systems resulting in theft of money or securities.
- Funds Transfer Fraud Coverage: Covers losses of money due to fraudulent instructions given to a financial institution that cause them to transfer funds from your account.
- Money Orders and Counterfeit Paper Currency Coverage: Covers losses from accepting fraudulent money orders or counterfeit currency.
- Social Engineering Fraud (Impersonation Fraud) Coverage: Often needs to be added as an endorsement. It covers losses when an employee is tricked into transferring funds or property due to a deceptive communication (like a fake email from a vendor or CEO).
- Clients’ Property Coverage: Some policies can protect against employee theft of a client’s money or property (e.g., if you run a cleaning service and an employee steals from a client’s home).
What Is the Average Cost of Fidelity and Crime Insurance in Texas?
The cost of fidelity and crime insurance in Texas can vary significantly. It depends on several factors:
- Size of Your Business: Larger businesses with more employees and higher revenues generally face higher premiums.
- Industry: Industries that handle a lot of cash, valuable inventory, or sensitive financial data (e.g., retail, financial services, accounting firms, non-profits) are often considered higher risk.
- Coverage Limits: The maximum amount of coverage you choose directly impacts the premium. Limits can range from tens of thousands to millions of dollars.
- Deductible: A higher deductible will lower your premium.
- Internal Controls and Security: Businesses with strong internal accounting controls, regular audits, background checks for employees, and security systems may qualify for lower rates.
- Claims History: Past claims will increase premiums.
- Type of Coverage: Broader coverage with more insuring agreements (like social engineering) will cost more.
While you might find very basic coverage starting from a few hundred dollars annually (e.g., $500-$1,500 per year for smaller businesses with basic employee dishonesty), a comprehensive policy for a mid-sized business with higher limits and specialized coverages (like social engineering) could range from $2,000 to $10,000+ per year. For large corporations, premiums will be significantly higher.
Fidelity Bond vs. Commercial Crime Insurance vs. D&O Insurance
These terms can be confusing, but they cover different aspects of risk:
- Fidelity Bond (Employee Dishonesty Bond): Today, “fidelity bond” is often used interchangeably with “employee dishonesty coverage” within a crime policy, which acts more like regular insurance (you don’t pay it back).
- Commercial Crime Insurance: This offers a much broader range of protection than just employee dishonesty. It covers internal employee theft, but also external crimes like robbery, computer fraud, funds transfer fraud, and counterfeiting.
- Directors & Officers (D&O) Insurance: This protects the personal assets of your company’s directors and officers (not all employees) from lawsuits related to their managerial decisions and wrongful acts in governing the company. It does not cover employee theft or fraud against the company itself.
In essence, crime insurance focuses on protecting your assets from criminal acts (internal or external), while D&O protects your leaders’ decisions from lawsuits.
Protecting Your Business from Fraud and Theft with Rollo Insurance
In today’s business environment, threats like employee theft, fraud, and cyber scams are more common and more advanced than ever. Fidelity and crime insurance helps protect your Texas business from financial losses caused by dishonest acts from inside or outside your company. At Rollo Insurance, we work with you to identify risks and create a coverage plan that fits your business. Reach out today to learn how we can help you safeguard your assets and keep your operations secure.
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