Fires, floods, and lawsuits announce themselves. You see the smoke or floodwaters or hear the knock at the door. As such, business insurance tends to focus on what’s outside. But some of the most destructive losses come from within. Employee dishonesty is rising fast, and if you don’t catch it early, the damage can be deep and lasting.
Businesses rely on trust but often overlook internal risks, such as employee dishonesty, which can cause significant financial and emotional harm. While focusing more on external threats, such as natural disasters, lawsuits, or cyber threats, businesses often overlook internal risks.
What Counts as Employee Dishonesty?
Employee dishonesty involves intentional acts by employees that result in financial losses for your company, including these common examples:
- Theft of cash, inventory, equipment, or proprietary data
- Forgery of checks or financial documents
- Embezzlement or skimming from accounts
- Payroll fraud, including ghost employees or inflated hours
- Unauthorized wire or ACH transfers
These acts fall under crime insurance or commercial crime insurance, not general business liability insurance. While general liability protects against third-party claims, crime policies address losses caused by insiders.
Why Employee Dishonesty Claims Are Rising
Several economic and operational shifts have made employee dishonesty more common:
- Economic uncertainty and inflation are putting pressure on households. Financial desperation can lead to opportunistic employee fraud, even from long-trusted employees.
- Remote work and digital tools have created visibility gaps. When there are fewer in-person controls and more online transactions, bad actors have more opportunities to conceal their activities.
- Small and mid-sized businesses often lack the internal checks larger companies rely on, such as segregation of duties or layered approval processes.
How Crime Insurance and Employee Dishonesty Coverage Work
Crime insurance covers direct financial loss caused by criminal acts such as employee theft, forgery, computer fraud, and social engineering scams.
There are distinctions between coverages. Employee dishonesty coverage, a key component of commercial crime policies, typically serves as a fidelity bond that covers the direct theft of the employer’s property by employees. In some cases, separate employee theft insurance, operating as a bond, is needed to protect against liability for employee theft of others’ property.
Not every business insurance policy includes crime coverage by default. Such potential exclusions are why reviewing your policy is critical, especially in today’s climate.
Coverage may include:
- Loss of cash, securities, or inventory stolen by employees
- Forgery or alteration of checks, drafts, or promissory notes
- Losses from fraudulent transactions or phishing scams
- Reimbursement for legal fees or investigative expenses
Real-World Examples of Employee Theft Insurance Claims
Employee dishonesty claims come in many forms. Here are just a few real-life examples:
- An office manager used the company credit card to fund personal vacations and retail purchases.
- A warehouse staff member gradually removed small amounts of merchandise, which, over time, added up to significant losses.
- A bookkeeper created fake vendor accounts and redirected payments to personal accounts.
- A payroll coordinator fabricated employee records and collected unearned paychecks for months.
Such cases can result in tens of thousands of dollars in loss. In some instances, the total damage may exceed six figures — a cost that would crush many businesses without insurance protection.
Prevention Strategies for Business Owners
While insurance is essential, strong prevention measures can reduce fraud risks significantly.
- Implement internal controls: Require two-person approval for payments, separate accounting duties, and schedule regular third-party audits.
- Screen thoroughly: Standardize background checks and reference calls, especially for financial or high-access roles.
- Invest in cybersecurity: Protect your business from unauthorized wire transfers, phishing attempts, and credential theft.
- Promote ethics and transparency: Offer fraud-awareness training, and establish a whistleblower policy that empowers employees to report suspicious activity without fear.
Why a Strong Business Insurance Program Isn’t Optional Anymore
One act of employee dishonesty can set your business back months or even years. A single claim can result in losses exceeding $1,000,000. Over many years.
Without employee dishonesty coverage or crime insurance, these losses likely won’t be covered under general liability. Coverage limits and exclusions vary, and many businesses don’t realize the gap until it’s too late.
As economic pressure mounts, it breeds uncertainty, which can lead to an increase in the number and complexity of internal financial fraud cases. Strong, specific coverage is essential.
Protect Your Business From the Inside Out
Employee dishonesty poses an internal threat to businesses. Brooks, Todd & McNeil offers business insurance, including employee dishonesty and commercial crime coverage, to protect against these risks.
Talk to our experienced agents to receive personalized service and comprehensive policies. We are eager to leverage our decades of combined experience to help you find the best and most affordable coverage for all your insurance needs.
About Brooks, Todd & McNeil
Since 1839, the independent agents at Brooks, Todd & McNeil have been pleased to offer our community the best and most affordable policies from a variety of providers. To learn more about our products and services, contact us today at (800) 448-4567.