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Does Business Insurance Cover Theft?

Thursday, May 30, 2024

Business insurance is a crucial safeguard for protecting your company’s assets from various risks, including theft. Understanding what types of theft are typically covered – and not covered – under a business insurance policy can help you ensure your business is adequately protected and prepared for unexpected losses. 

Person in black hoodie walking in the dark.

Types of Theft Typically Covered by Business Insurance

Does business insurance cover robbery? Does it cover stolen tools? Typically, yes. Commercial property insurance is a type of business insurance that protects against several different types of theft, including coverage for stolen physical assets such as equipment, inventory, and furnishings within the insured premises. 

Specific coverage details and limitations vary from one commercial policy to another, so it’s important for business owners to ask their insurance agent about specific vulnerabilities. For example, some standard policies don’t cover financial losses due to criminal activities such as theft, fraud, and embezzlement. In cases such as these, it may be worth exploring crime insurance. It covers a range of incidents, including employee dishonesty, forgery, computer fraud, and burglary. 

The types of theft most – but not all – business insurance policies cover are:

  • Burglary: Unauthorized entry into your premises to steal property or assets.
  • Robbery: Theft involving force or the threat of force against individuals on your business premises.
  • Vandalism: Deliberate damage to property that may accompany theft.
  • Employee Theft: Misappropriation of funds or property by employees, also known as employee dishonesty.
  • Cybercrime: Theft involving unauthorized access to digital information, such as data breaches or financial fraud.
  • Forgery & Alteration: Theft involving fraudulent checks or other financial documents.
  • Credit Card Fraud: Unauthorized use of credit or debit cards to steal funds from your business.
  • Theft of Intellectual Property: Stealing proprietary information, trade secrets, or copyrighted material.

Theft Typically Not Covered by Business Insurance

There are some types of theft that are not typically covered by business insurance policies, including:

  • Theft by Business Owners: Losses resulting from theft committed by the business owner or partners.
  • Voluntary Parting: Situations where property is willingly given to someone under false pretenses.
  • Theft of Vehicles: Standard business insurance may not cover the theft of company vehicles, which usually requires separate commercial auto insurance.
  • Theft Outside of Business Premises: May not be covered unless the policy includes off-premises coverage.
  • Theft Due to Negligence: Such as leaving the premises unsecured.
  • Specific Exclusions: Certain high-risk items or specific exclusions outlined in the policy, such as fine arts, cash over a certain limit, or specific types of merchandise. More on this below.
Person breaking into a window.

Special Business Insurance Considerations

Companies with very high-value assets or significant cash holdings face unique risks that necessitate special business insurance considerations. As a result, these companies often need to explore specialized policies or endorsements to their existing coverage to effectively mitigate these risks.

One critical consideration is the need for higher coverage limits to protect high-value assets fully. This can include buildings, machinery, inventory, or intellectual property that exceeds the standard coverage limits of typical commercial property insurance. In addition, businesses with large cash reserves or frequent cash transactions should consider a fidelity bond or crime insurance specifically tailored to cover losses from employee theft, fraud, and other criminal activities. 

Filing a Theft-Related Business Insurance Claim

Filing a business insurance claim following a theft is similar to filing other insurance claims, but there are often a lot more people in the vicinity than, say, your home. It’s important that the area be left as is and secured so that adequate documentation can be gathered and a proper investigation conducted. This step-by-step guide will help you navigate the claims process, ensure it is processed efficiently, and that you receive the compensation you are entitled to for your losses.

  1. Contact the authorities; obtain a police report
  2. Promptly notify your insurance company; most have a time limit for filing a claim.
  3. Document the loss; include descriptions, serial numbers, estimated values/receipts, photos.
  4. Secure the premises; e.g. repair broken windows or locks, enhance security measures.
  5. Complete claim forms; include details from the police report and your documentation.
  6. Work with the adjuster; provide additional information or access as needed.
  7. Follow up; check on the status of your claim, share updates, address questions.
  8. Review the settlement; discuss any concerns with your insurance company.
  9. Implement preventive measures; take steps to prevent future thefts. 

Preventative Measures & Risk Management 

Implementing preventive measures and effective risk management strategies can significantly reduce the likelihood of business theft. Here are a number of preventative measures examples that businesses might consider:

Physical Security Measures

  • High-Quality Security Cameras
    Cover entry and exit points, storage areas, cash registers; cameras should be visible.
  • Alarm Systems
    Consider systems that are connected to local law enforcement or a security company.
  • Secure Entry Points
    Reinforce doors and windows with locks, security bars, and shatterproof glass.
  • Safes for Cash & Valuables
    Store cash, sensitive documents, and valuable items in a safe bolted to the floor.
  • Adequate Lighting
    Install exterior and interior lights; motion-sensor lights can be particularly effective.

Employee-Related Measures

  • Background Checks
    Applicable to all employees, especially those handling cash or sensitive information.
  • Access Controls
    Restrict certain access to authorized personnel only via key cards, biometrics or PINs.
  • Audits & Inventory Checks
    Conduct regular audits and inventory checks to detect discrepancies early. 
  • Employee Training
    Train employees on how to handle cash and respond to security incidents.
  • Anonymous Reporting System
    Establish a system for employees to report suspicious activities anonymously. 

Cybersecurity Measures

  • Firewalls & Antivirus Software
    Prevent unauthorized access and malware via robust firewalls and antivirus software.
  • Strong Passwords
    Require unique, complex passwords, regular updates, and multi-factor authentication.
  • Data Encryption
    Encrypt sensitive data from unauthorized access and breaches, both in transit and at rest.
  • Regular Software Updates
    Regularly update all software and systems to protect against vulnerabilities and exploits. 
  • Cybersecurity Training
    Train on best practices, e.g. recognizing phishing attempts and safe internet usage.
Man sitting in front of several computer screens.

Policy & Procedure Measures

  • Security Policy
    Outline preventive measures, response protocols, and employee responsibilities. 
  • Security Drills
    Ensure employees know how to respond to various security incidents, including theft.
  • Clear Opening & Closing Procedures
    Develop and enforce strict procedures for opening and closing the business.

Additional Measures

  • Armored Transport Services
    Transport large amounts of cash and valuable items via armored transport services.
  • Security Guards
    Deter potential thieves and provide immediate response in case of a security incident.
  • Visitor Management System
    Track and manage guests, contractors, and other non-employees entering the premises. 
  • Panic Buttons
    In case of an emergency, install at strategic locations to quickly alert authorities or security.

Want to ensure your business is adequately protected from theft? Connect with the Independent Insurance Associates team – we stand ready to help you prepare for the unexpected.