In this article, we will look at commercial crime insurance - the 'safety net' that can safeguard your business from catastrophic losses caused by third-party or internal workers. After reading this article, you should have a good understanding of what commercial crime insurance is, the types of crime insurance, why you need it, what it covers and leaves out, and many other topics.
Let’s start with the basics first!
What is commercial crime Insurance Coverage?
Despite robust internal procedures that can help a company prevent fraud, dishonest employees and external fraudsters can breach the security of even the best-run companies. Commercial crime insurance protects businesses against losses caused by criminal acts like fraud, theft, and embezzlement. Companies can obtain this kind of insurance to protect themselves against financial losses caused by such illegal activities committed by workers, customers, vendors, or other third parties. With the exorbitant rise in criminal activity and internal fraud in recent times, commercial crime insurance has become an essential component of risk management for any organization. Businesses may strengthen their risk management practices, preserve their assets, and boost their reputation by having this coverage in place.
What is covered by commercial crime Insurance Coverage?
Typical commercial crime insurance in India covers the following-
- Premises coverage
It covers losses caused due to disappearance, wrongful abstraction, destruction, or computer theft of securities or money from the policyholder's premises by external parties.
- Employee theft coverage
This policy protects a company from damages caused by the dishonesty of its workers. This includes theft of securities, money, or other property by an identifying employee of the insured organization. It also covers loss caused by an employee's forgery or alteration of checks, bills of exchange, and promissory notes. Other obvious instances of internal employee theft covered include embezzlement, larceny, information theft, and skimming.
- Depositors Forgery Coverage
It covers damages caused by financial instruments such as cheques written illegally on the Insured's accounts by a third party.
- Kidnap and ransom coverage
This insurance protects businesses that are vulnerable to extortion or kidnapping, such as those involved in foreign trade or travel.
- Transit coverage
Commercial crime insurance covers damages caused by a third party's destruction, disappearance, or wrongful appropriation of money or securities beyond the Insured's premises.
- Computer fraud coverage
This policy protects a company from damages caused by third-party computer fraud, such as attacks by hackers, viruses, and other destructive actions. This coverage is available as a separate policy or as an endorsement of a commercial crime policy.
- Other coverage related to non-employees
While employees remain the foremost concern for organizations, a crime policy generally covers losses caused by specific acts of non-employees, such as
- The insured's bank receives false instructions for an electronic funds transfer from the insured.
- The insured receives counterfeit currency.
- Fraud involving social engineering.
Companies can suffer severe reputational damage and financial damages from any of the above incidents, and this is what makes crime insurance extremely essential for businesses.
What is not covered under commercial crime insurance Policy?
A crime insurance policy in India typically does not cover the following items.
- Risks covered by other insurance policies
- Losses incurred due to warfare, civil war, rebellion, revolution, military action, insurgency, or Governmental intervention or expropriation
- Losses incurred by the theft or fraud caused by the partner(s) of the insured
- Expenses incurred by the Insured in determining the presence or extent of any covered loss.
- Cost of replicating any information included in lost or damaged manuscripts, documents, accounts, records, and so on.
- Losses resulting from cybercrime, such as lost patents, trade secrets, and customer lists
Commercial Crime Insurance Program Key Coverage Provisions
The following characteristics are generally found in crime coverage policies:
- It is common for crime insurance policies to be written on a "named perils" basis, which means that if a loss occurs within one of the categories of the crime specified in the policy, it is covered.
- There is usually no aggregate limit for commercial crime policies and each loss is treated separately.
- Although deductibles are applied separately to each loss, a series of acts by the same person or group of persons are considered one loss, and thus subject to the same limit and deductible regardless of how long the theft continues.
It is possible to obtain coverage for commercial crime in two scenarios:
- It is preferable to use a "loss discovered" form because it covers any loss discovered during the policy period.
- If a loss is sustained, coverage is provided under a "loss sustained" form.
Loss is discovered in two ways:
- A covered loss occurs when it becomes evident, even if all facts about the loss are still unknown, that the insured has suffered a covered loss.
- Legal action is taken against the insured alleging covered acts.
A written notice must be provided by the insured as soon as possible, but not more than 30 days after discovery. The insured is usually required to file proof of loss within four to six months of discovery of the loss. Several insurance policies will allow their clients to hire forensic accountants or attorneys as part of their proof of loss process. The "discovery" process should be limited to specific departments or individuals (such as risk management and legal).
Important points to consider
When it comes to commercial crime insurance, there are a few things you will want to keep in mind when shopping for the right plan. Here are a few of these:
1. Determine What You Need: The first step is to figure out what exactly you need from your commercial crime insurance policy. What types of crimes do you need coverage for? What's your budget? Once you have a good idea of your needs, you can start shopping around for the right policy.
2. Compare Policies: Not all commercial crime insurance policies are equal. Be sure to compare policies from different insurers to make sure you are getting the coverage you need at a price you can afford. At BimaKavach, you get the best commercial crime insurance recommendation in just 5 minutes.
3. Get Quotes: Once you have narrowed down your options, be sure to get quotes from each insurer before making your final decision. This will help ensure that you are getting the best deal possible on your commercial crime insurance policy.
Conclusion - Hope you understood the commercial crime insurance meaning. Crime insurance is an important tool for businesses that want to be proactive in protecting themselves from fraud and theft. It helps business owners protect their property, assets, and profits while providing peace of mind, knowing that they are covered against any losses due to criminal activity. For the best recommendation on commercial crime insurance, you may contact BimaKavach. Here, you can get the best recommendation for any insurance product within 10 minutes. Further, to understand any policy wordings, get in touch with our experts.
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