As the saying goes, "Better safe than sorry". For businesses in India, this adage holds true when it comes to protecting themselves against unforeseen circumstances like employee dishonesty. One of the best ways to ensure that your business is safeguarded from such perils is by investing in fidelity insurance. This type of insurance can provide coverage for losses resulting from employee embezzlement, forgery, theft, etc. In today's unpredictable world where fraud and scams are becoming increasingly common, having a fidelity policy can be crucial for any business looking to protect its assets and reputation. In this blogpost, we will discuss in detail, what fidelity insurance meaning is and how it can be helpful for your business.

Let’s start with the basics first!

What is Meaning of Fidelity and Crime Insurance?

Fidelity insurance is a type of business insurance that helps protect a company from losses that may occur due to the dishonest or fraudulent activities of its employees or other stakeholders. It is also known as ‘Commercial Crime Insurance’ or ‘Crime Insurance’. This type of insurance can help cover things like theft, embezzlement, and forgery. Companies can obtain this insurance to protect themselves against financial damages caused by illegal activity committed by workers, vendors, customers, or other third parties, for which, the company is held liable.

As an example, let us assume you have a window repair company. You have sent a worker to one of your customer's homes to repair the windows. But, the worker ended up stealing some jewellery from the customer's home and your company is held liable for the theft. In such a scenario, fidelity insurance can protect your business and yourself against potential loss, damage, and expenses, arising from the claim or lawsuit from the customer.

Get Free Quote in Minutes

Why does your business need Fidelity Insurance in India?

Even though adequate internal controls, audits, and a skilled external CPA can considerably reduce employee theft, even the most cautious companies have incurred enormous financial losses. In 2017, businesses across the world lost an estimated $4 trillion to scammers, according to a new survey. A suitable fidelity insurance policy can cover your organisation against everything from corporate asset theft to more complicated online frauds.

Petty theft is more likely to be faced by businesses that:

  • Participate in currency transactions
  • Hire part-time workers
  • Possess expensive office equipment
  • Are engaged in inventory management

Similarly, if you are engaged in the activities listed below, you are more exposed to digital/electronic theft and manipulation.

  • Electronic transactions
  • Customer information
  • Sensitive financial records

Needless to say, losses resulting from criminal conduct may be both annoying and costly. Business fidelity insurance can protect organisations financially from losses caused by criminal activities by your employees and other stakeholders. In the event of a loss, the insurance provider will compensate your organisation, which might assist you in recovering from the financial implications of the loss.

Furthermore, business fidelity insurance may help you in improving your company's risk management practices. You can detect possible vulnerabilities in your operational processes and take steps to address them by obtaining such coverage. This can assist you in lowering the possibility of losses that may happen in the first place. Getting fidelity insurance can also assist you to boost your company's image or reputation. If your company suffers a loss as a result of criminal activity by one of its employees, it might tarnish the company's reputation. Having this insurance in place helps communicate to your vendors, customers, and other stakeholders that your company values the security of its assets.

What all are covered by Fidelity Insurance?

Fidelity Insurance covers theft by employees. Along with that, there are many other coverages.

  1. Employee Theft - This policy protects a company from damages caused by the dishonesty of its employees. It may include the theft of securities, money, or other property by a recognizable employee of the insured. It also covers the loss caused by an employee's forgery or tampering with checks, exchange bills, and promissory notes. Other obvious instances of internal employee theft covered include information theft, embezzlement, and skimming.
  2. Embezzlement - You are covered if an employee uses company funds for something other than what was expected. For example, if someone makes a fake bill or receipt and uses the funds for personal expenses.
  3. Forgery - If an employee forges your signature on a check or document, for example, you will be covered under this insurance.
  4. Theft from Customers/Clients - A forgery or alteration committed by an employee is also covered by this insurance. For example, someone who works for you may forge your signature on a check.
  5. Third-party losses – These also include the damages and losses on the business committed by a third-party criminal act.
  6. Kidnap and ransom coverage- This insurance protects businesses that are vulnerable to extortion or kidnapping, like those involved in foreign trade or travel.
  7. Transit coverage-Commercial crime insurance covers losses resulting from the disappearance, destruction, or wrongful appropriation of money or securities outside the insured's premises by a third party.

What is excluded from Fidelity Insurance?

Commercial fidelity insurance cannot be claimed in certain conditions, which are listed as exclusions in a standard business fidelity insurance policy in India. These are some examples:

  1. A financial loss that occurs outside of India.
  2. Cybercrime losses like trade secrets and patents
  3. Losses incurred as a result of warfare, insurgency, rebellion, civil war, revolution, military action, or Governmental intervention or expropriation
  4. An employee who has been accused of fraud or dishonesty more than once.
  5. Cost of replicating any information included in lost or damaged manuscripts, documents, accounts, records, and so on.
  6. Damages or losses arise from indirect or consequential causes (such as missed opportunities, reduced profits, or business interruptions).
  7. Losses incurred or exacerbated by the theft or fraud caused by the partner(s) of the insured
  8. Losses discovered 12 months after the employee's termination.
  9. If you (the employer) failed to adhere to the agreed-upon methods of checks and precautions.
  10. Losses that do not result from fraud or dishonesty, such as stock shortages, and trading losses.
  11. Property damage due to fire
  12. Mistakes and negligence of C suite executives
  13. Losses resulting from cybercrime, such as lost patents, trade secrets, and customer lists
  14. Risks covered by other insurance policies
Who Needs Fidelity Insurance

Who needs Fidelity Insurance?

A fidelity insurance policy might be a good idea for your business if:

  • It deals with a large amount of petty cash. Examples – Restaurants, Cafes, stores, theatres
  • Your business is dealing in lots of products. Examples – Shops, Boutiques
  • There is a lot of dealing with clients, vendors, and customers. Example – Event planners, Marketing & PR agencies
  • Your business is taking clients’ personal information (like online stores).

Important points to note while adopting a Fidelity Insurance coverage

Noting the following points would help you while adopting a Fidelity Insurance coverage for your organization:

  1. Businesses must provide a detailed list of employees and departments to the insurer.
  2. It is important to disclose all the details required by the insurance company in the proposal form to avoid any hassles during the claim process.
  3. The premium amount is determined by the number of employees, the nature of the business, and the level of risk exposure.
  4. The proposal form can be submitted with other relevant documents once the business owner has a clear understanding of the policy and premium payment.
  5. In the event of any loss or damage arising from an insured event during the policy term, the insured business must immediately notify the insurance company.
  6. A claim can only be initiated by submitting relevant documents along with a duly completed claim form.
  7. Afterwards, the insurance company will conduct a loss assessment.
  8. When a claim is approved, the insured business will receive the amount based on the policy limits.
  9. A company that rejects a claim will inform the insured business of the reason for the rejection.


Fidelity insurance is an essential part of running a business in India. With the increasing incidents of cybercrime and internal fraud, commercial crime insurance has become a crucial part of risk management for any business. By having this coverage in place, businesses can improve their risk management practices, protect their assets, and improve their reputation. We hope the discussion above will help you understand what fidelity insurance is, why you need one, and what it covers and excludes. For the best recommendation on fidelity insurance, you may contact BimaKavach.