All small business owners in every industry know they need to be vigilant in protecting their assets from all forms of theft, including internal theft.

 Doing so requires a thoughtful loss prevention strategy – practices implemented to minimize or prevent various losses, including theft, fraud, shrinkage, and other risks that could negatively impact your company’s assets, profitability, and overall financial well-being.

 And while you want to trust the people you hire, unfortunately, your business may be more susceptible to internal crime than you think.

 According to data, 75% of employees admit to stealing from their workplaces at least once, and 64% of small business employees pinch or lift funds from their employers. That’s costing Canadian businesses between $1.4 billion and $2 billion annually.

That doesn’t mean everyone you hire, including third-party vendors, is a potential thief. However, it does highlight the necessity of having a loss prevention strategy and enhancing it with commercial crime insurance.

Commercial Crime - Business Owner

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What Is Commercial Crime Insurance?

Commercial crime insurance is designed to cover a business owner’s financial losses resulting from business-related crime, including internal theft by employees, forgery, robbery, and electronic crime

What Types of Internal Theft Are There?

Comedian Rodney Dangerfield once quipped, “One time a pulled a job. I was so stupid. I picked a guy’s pocket on an airplane and made a run for it.”

Witticism aside, internal theft and robbery are no laughing matter. There are several types of internal crime you need to be wary of, including:

  • Embezzlement: Embezzlement is the misappropriation or theft of funds entrusted to an employee’s care. It can occur through manipulating financial records, diversion of cash, or unauthorized transfers.
  • Cash theft: Employees may steal cash from cash registers, petty cash funds, or directly from company deposits.
  • Payroll theft: Employees may manipulate a timesheet or payroll system to receive unearned wages.
  • Inventory theft: Also referred to as ‘shrinkage’, inventory theft occurs when employees steal or manipulate inventory records to conceal theft.
  • Fraudulent expense claims: Employees submit false or inflated expense reports to receive reimbursement for expenses that were never incurred or were personal.
  • Supplier fraud: Employees may collude with external suppliers to submit inflated invoices or receive kickbacks for approving fraudulent transactions.
  • Intellectual property theft: Employees may steal or misuse proprietary information, trade secrets, or intellectual property for personal gain or to benefit a competitor.
  • Data theft: Unauthorized access to and theft of sensitive digital information, including customer data, financial records, or other confidential company information.
  • Equipment theft: Employees may steal company-owned equipment, tools, or assets for personal use or resale.
  • Unauthorized discounts or refunds: Employees may provide unauthorized discounts to friends or family or issue fake refunds to themselves or others.

What Does a Loss Prevention Strategy Include?

Establishing a loss prevention strategy can help prevent or minimize theft and inventory or monetary losses. Creating one unique to your business involves multiple factors, including: 

  • Implementing physical security measures, such as monitored surveillance systems, access controls, and alarms, to deter and detect unauthorized access or theft.
  • Training employees to raise awareness about potential risks and promote a culture of accountability.
  • Implementing inventory management systems to track and control stock levels, reduce shrinkage, and identify discrepancies that may indicate theft or fraud.
  • Establishing and enforcing internal controls to safeguard financial transactions, sensitive information and critical business processes, such as segregating employee duties who have access to these data and systems and regularly reviewing financial records.
  • Conducting thorough background checks during the hiring process to screen potential employees for criminal histories.
  • Implementing measures to detect and prevent fraudulent activities, such as unauthorized transactions, forged documents, and deceptive practices.
  • Developing and regularly updating emergency preparedness plans to address natural disasters, accidents, or other unexpected events that could result in losses.
  • Establishing relationships with your local police force to enhance security measures and facilitate a coordinated response in case of criminal activities.

How Does Commercial Crime Insurance Work?

Also known as fidelity insurance, commercial crime insurance provides business owners coverage for the direct loss of funds due to internal theft or robbery. 

It also covers you from internal acts of forgery, counterfeiting or impersonation that result in stolen money, inventory (both physical and digital), property, stocks, or securities. In addition, it can cover the dishonest actions of employees and third parties (such as contractors and volunteers). 

Commercial crime insurance can be purchased as a standalone policy, but it’s usually added as an endorsement to an existing insurance policy package.

Here’s a general overview of what it features and how it works:

  • Employee theft. Protects your business from employees’ theft of money, securities, or property.
  • Forgery or alteration. Covers losses due to forged cheques, monetary drafts, promissory notes, or similar financial instruments.
  • Computer fraud. Protects your finances and reputation against losses resulting from an employee’s unauthorized access to computer systems to commit fraud.
  • Funds transfer fraud. Covers losses from unauthorized electronic funds transfers sent by employees.
  • Money and securities. Covers the physical loss or damage to paper-based money, coins, banknotes, securities, and other negotiable instruments.

All insurance policies have specified coverage limits on the maximum amount your insurance provider will pay for a covered loss after you file a claim. When purchasing a policy, it’s vital to carefully assess your potential exposure and select appropriate coverage limits for each type of insurance you have (a Zensurance broker can help you do that).

Four other factors come into play when filing a claim due to internal theft, including:

1. Your Deductibles

Businesses may need to pay a deductible before their insurance provider pays for a loss. A deductible is the amount you must contribute toward the loss before the insurance company starts paying. You have the option of determining what the deductible is (typically $500 or $1,000 for each claim you make).

2. A Risk Assessment

Insurance providers assess the risk associated with your business when you apply for coverage. That includes evaluating the nature and size of your business, its location, the industry you’re in, what internal controls you have, the coverage levels you choose, and any previous history of losses or insurance claims. These factors will determine what your annual premium will be.

3. An Investigation

If you file a claim for damage or loss, your insurer will likely assign an insurance adjuster to investigate to verify the validity of your claim. Internal (or external) theft claims may include working with law enforcement agencies.

4. Payment 

If the claim is approved and the loss is within your policy’s coverage limits, your insurer will pay you and help you recover financially from the covered criminal activity.


What Types of Businesses Need Commercial Crime Insurance?

Commercial crime insurance should be considered a vital policy for businesses of all sizes. 

Small business owners especially should have crime insurance, not because they’re more at risk but because one act of theft could be crippling in terms of its expense.

 If you can answer “yes” to any of the following questions, your business is susceptible to internal theft: 

  • Do employees have access to your company’s money, inventory, or equipment?
  • Do contractors or volunteers ever work alone on your property?
  • Do you keep valuable business items on- or off-premises in a safe or vault?
  • Do you have inventory or merchandise that can be easily stolen?
  • Do you accept electronic payments?


Here’s a list of some of the ways your business can be covered by commercial crime insurance: 

  • Theft by an employee: A policy may cover all financial losses related to employee theft (so long as you weren’t aware of the robbery before the policy start date). Say you own a retail store, and you’ve noticed an employee failing to register all customer purchases, and instead taking the money and pocketing it.
  • Loss of money while in transit: If you’re a victim of theft while your money or other securities are in transit – even if it’s with a security company driving an armoured vehicle. You can also be covered if the money is damaged or destroyed beyond acceptable use due to an event that occurs while it’s being transported.
  • Counterfeit money: You can be covered if you accidentally accept counterfeit currency or forged cheques if you or an employee assumed they were legitimate.
  • Electronic funds transfer fraud: Many computer-related claims are covered by a cyber liability insurance policy. However, funds transfer fraud is an instance that a crime policy can cover. Funds transfer fraud is when an employee uses a company computer to transfer funds from inside the business or the company’s bank account to a third party.


What Isn’t Covered by Commercial Crime Insurance?

Crime insurance doesn’t cover all criminal acts, such as ones that are covered by other policies and criminal acts that are known by the insured, such as: 

  • Crimes committed by the insured, executives, business partners, or employees acting in coordination with any of these groups.
  • Indirect losses, such as having to close shop due to a break-in to have repairs made. In such an instance, business interruption insurance is designed to cover that.

Most commercial crime policies have a $5,000 limit. If you need a higher limit, speak to a Zensurance broker.


Safeguard Your Assets Against Internal Theft With Commercial Crime Insurance

Crime exists even in the most secure and vigilant businesses. Protecting what’s valuable to you with commercial crime insurance is crucial.

 Get the low-cost coverage your business requires by filling out our online application for a free quote. We’ll shop our partner network of over 50 Canadian insurance providers to get the commercial crime policy you need and customize it to suit your business’s requirements.

– Updated January 15, 2024.

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About the Author: Brandon Bowie

Brandon Bowie is a Team Lead, Professional Lines at Zensurance.