Does Business Insurance Cover Employee Theft?
Learning goal: Know why a standard business policy usually doesn't cover theft by your own employees, and which coverage does.
Short answer
Usually not under a basic policy. Triple-I says employee dishonesty is excluded from the basic business owners policy, and burglary and robbery coverage doesn't cover dishonest acts by employees. You can add employee dishonesty coverage to a BOP for an extra premium, or buy business crime insurance, which also can cover computer and funds transfer fraud.
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On this page
The Fuller Picture
Most business theft is imagined as a break-in, but losses from employees, such as embezzlement or stolen inventory, often go on for months before anyone notices. Those losses need their own coverage, plus controls that catch them early.
Key Takeaways
- Triple-I: "Some, such as employee dishonesty or breakdown of a steam boiler, are excluded from the basic BOP, but you can add coverage to it by payment of an additional premium."
- "Burglary and robbery insurance does not cover losses caused by employees or authorized representatives who commit dishonest acts," Triple-I says.
- "Employee Dishonesty Insurance covers losses caused by temporary or leased workers as well as employees," per Triple-I.
- A commercial package policy can include business crime insurance, which Triple-I says "covers losses from burglary, computer fraud, employee dishonesty and other business crimes."
- Coverage usually has its own limit, and policies set rules on when a loss must be discovered and reported.
Real-World Example
A bookkeeper's two-year scheme
The owner of a small landscaping company discovers that her bookkeeper paid a fake vendor $38,000 over two years. Her business owners policy excludes employee dishonesty, but she had added an employee dishonesty endorsement with a $25,000 limit. The insurer pays up to that limit, after its investigation, and she pursues the rest from the former employee through the courts.
Common Mistakes
- Assuming theft coverage includes theft by employees.
- Choosing a crime limit far below the money the business handles.
- Having one person handle both payments and bank reconciliations.
Interactive Exercise
Check your theft gaps
Use your policy's declarations and endorsements.
Tick each step as you do it. Your checklist is saved in this browser.
Knowledge Check
Question: A cashier steals $4,000 from the register over several months. The store has a basic BOP with burglary and robbery coverage only. What's most likely?
Recommended Insurpedia Tools
- Coverage Builder: Answer a few questions about your home, vehicles, family and work, and see insurance topics worth researching for your situation, each linked to a plain-English explanation. It doesn’t tell you what to buy.
Related Insurance Terms
Related Scenarios
Questions to explore next
Questions readers often ask next about this topic:
- What's the difference between crime insurance and a fidelity bond?
- How much employee dishonesty coverage should a small business carry?
- Does crime coverage include funds transfer fraud?
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The factual claims on this page were checked against these sources. Rules and figures change, so check the source itself if you need to confirm the current version.
- Insuring your business: property insuranceInsurance Information Institute (Triple-I)
- Understanding commercial package policiesInsurance Information Institute (Triple-I)
Educational information, not advice: This lesson is for general education only, not legal, financial, or insurance advice. Actual coverage, discounts, and requirements depend on your policy’s wording, your insurer, and the laws of your state. Confirm specifics with your own insurer or a licensed agent before making a decision. Insurpedia does not sell insurance and does not recommend specific insurers. The exclusion and coverage points come from Triple-I's small business insurance guide and its commercial package policy article.