My Accountant Embezzled $200k: How Crime Insurance Saved Our Company
The Person I Trusted Most Was Robbing Me Blind
For five years, our bookkeeper was like family. She handled everything. Then, an audit revealed the devastating truth: she had been slowly siphoning money, forging checks, and padding expense reports. The total theft was over $200,000. It was a deep personal betrayal, but it was also a business-ending financial loss. We didn’t have the cash to cover it. Our Commercial Crime insurance policy was our only salvation. After a forensic investigation, it reimbursed us for the stolen funds, allowing our company to survive the ultimate insider threat.
Protect Your Business from Internal Theft: Crime Insurance Explained
Insurance For When the Call is Coming From Inside the House
We spend a lot of time thinking about outside threats—hackers, robbers, lawsuits. But what if the biggest threat is already on your payroll? Crime insurance is designed to protect your business’s assets from theft and fraud, especially from your own employees. It’s the policy that responds when a trusted manager skims cash from the register, a bookkeeper writes fake checks to themselves, or an employee uses a company credit card for a lavish vacation. It protects your cash, securities, and other property from criminal acts.
Employee Dishonesty Coverage: When Trusted Workers Steal
The “Perfect Employee” and the Stolen Inventory
Our warehouse manager was a model employee—always first to arrive, last to leave. Over two years, he masterminded a scheme, subtly altering inventory records and using a fake company to steal over $100,000 worth of our product. We only discovered it when a new system flagged the discrepancies. The “Employee Dishonesty” section of our Crime policy was crucial. It paid to hire a forensic accountant to unravel the scheme and then reimbursed us for the full value of the stolen goods. It was a harsh lesson that theft often comes from the people you least suspect.
Forgery or Alteration Coverage: Protection Against Fake Checks/Documents
The Check That Looked Real, But Cost Us $10,000
We received what looked like a perfectly legitimate check for $10,000 from a new client. We deposited it, shipped the product, and moved on. Two weeks later, the bank notified us the check was a sophisticated forgery and clawed the money back from our account. We were out the money and the product. Our Crime insurance policy included “Forgery or Alteration” coverage. We filed a claim, provided the bounced check and bank notice, and the policy reimbursed us for the loss. It protected us from a very convincing—and costly—scam.
Computer Fraud & Funds Transfer Fraud: Covering External Hacking/Scams
The Hacker Who Posed as Our CEO
My company’s CFO received an email, seemingly from our CEO, instructing him to immediately wire $50,000 to a new vendor for a top-secret acquisition. The email was a fake, a classic “Computer Fraud” scam. The money was wired to the hackers and instantly vanished. It wasn’t an employee stealing; it was an outsider tricking us. Our Crime insurance policy had a specific provision for fraudulent funds transfers initiated by a third-party hacker. That coverage was the only reason we got our $50,000 back.
Does Crime Insurance Cover Social Engineering (Impersonation Fraud)? Sometimes (Endorsement!)
The Fake Vendor and the $30,000 Mistake
My accounts payable clerk received an email from one of our regular vendors stating they had a new bank account. She updated the information and paid their next $30,000 invoice. It turned out the vendor’s email had been hacked, and we had sent the money to a thief. My standard Crime policy didn’t cover this because my employee authorized the payment willingly. To cover this “Social Engineering” fraud, where an employee is duped, I needed a specific, separate endorsement. It’s a modern risk that requires a modern addition to your policy.
Comparing Crime Insurance Policies: Coverage Parts and Limits
Building Your Own Anti-Theft Policy
When I bought Crime insurance, my agent didn’t just give me a price. He showed me a menu of seven different coverage parts—things like Employee Dishonesty, Forgery, Computer Fraud, and Money & Securities. He explained I could pick and choose, setting a different limit for each one based on my specific risks. As an online business with no cash on-site, I chose a low limit for Money & Securities but a high, $500,000 limit for Employee Dishonesty and Computer Fraud. It allowed me to build a policy that fit my exact business model.
How Much Crime Insurance Does Your Business Need? Assess Internal Controls!
My Messy Books Cost Me a Higher Premium
My friend and I applied for Crime insurance. My business requires dual signatures on all checks and mandatory monthly audits. My friend’s business lets one person handle everything from billing to payments. Even though our revenues were similar, my premium was 40% lower. My agent explained that my strong “internal controls” make my business a much lower risk for employee theft. The insurer saw his lack of controls as an open invitation for fraud, and his premium reflected that higher risk.
Filing a Crime Insurance Claim: Proving Employee Theft or Fraud
You Can’t Just Accuse Someone; You Need Proof
We suspected an employee was stealing, but suspicions aren’t enough to file a Crime insurance claim. The insurer told us we needed to provide clear proof of the loss. We had to hire a forensic accounting firm to conduct an independent investigation. They analyzed years of financial records and provided a detailed report that quantified the exact amount stolen and directly implicated the employee. That impartial, expert report was the key piece of evidence our insurer needed to approve our claim. It was a costly but necessary step.
Does Crime Insurance Cover Theft of Inventory or Property (Not Just Money)?
He Didn’t Steal Cash; He Stole Copper Wire
My plumbing supply company was hit by a sophisticated theft ring led by one of our own warehouse employees. They weren’t stealing cash; they were stealing thousands of dollars’ worth of valuable copper pipe and fittings. I was worried our Crime policy only covered theft of money or securities. I was relieved to learn our policy’s definition of “Employee Dishonesty” was broad. It covered not just “money,” but also “other property.” The policy paid us for the full value of our stolen inventory.
Understanding Discovery vs. Loss Sustained Policy Forms for Crime
The Theft That Happened Two Years Ago But Was Covered Today
We discovered our former CFO had been embezzling funds for years. The theft actually occurred under a prior insurance policy, which had expired. I panicked. But my current Crime policy was a “Discovery Form.” This meant it covered any loss I discovered during the current policy period, regardless of when the theft actually happened. The alternative is a “Loss Sustained Form,” which only covers losses that both happened and were discovered during the policy term. The Discovery Form provides much broader protection for long-term, hidden fraud schemes.
My Experience Uncovering Employee Fraud (And the Insurance Claim)
The Sinking Feeling When the Numbers Don’t Lie
For months, our profits were just slightly off. I couldn’t figure it out. Finally, I hired an outside accountant to do a deep dive. He found it: our office manager had been using a company credit card to pay for her car, her vacations, and her shopping sprees, coding them as office expenses. The total was over $60,000. The sense of betrayal was overwhelming. Reporting it to our Crime insurance carrier was tough, but their process was professional. They guided us through the investigation and ultimately reimbursed us for the stolen funds.
Preventing Internal Crime: Background Checks, Segregation of Duties
The Checklist My Insurer Made Me Sign
When we renewed our Crime insurance policy, the premium had gone up. My agent said we could lower it if we implemented stronger controls. To get the discount, we had to attest that we conduct criminal background checks on all new hires who handle money, and that we enforce “segregation of duties”—meaning the person who approves payments cannot be the same person who signs the checks. These simple, commonsense controls made us a safer business and directly lowered our insurance costs.
What Crime Insurance DOESN’T Cover (Owner Theft? Indirect Losses?)
The Two Claims My Policy Wouldn’t Pay
My Crime policy is great, but it has boundaries. I learned this when my business partner stole from the company. The policy wouldn’t cover it, as theft by a majority owner is almost always excluded. In another instance, after an employee embezzled funds, we had to pay our accountants for hundreds of extra hours to fix our books. The policy paid for the stolen money, but not the “indirect loss” of the extra accounting fees. It’s important to understand these limitations.
Protecting Your Assets from Both Internal and External Criminals
Building a Fortress with Two Different Kinds of Guards
Think of your business’s assets as a fortress. You need two types of protection. You need guards watching the walls for outside attackers—that’s your cyber insurance, protecting you from external hackers. But you also need guards watching the treasury inside the walls—that’s your Crime insurance, protecting you from trusted insiders who decide to steal. A complete security plan requires you to defend against both external scams and internal betrayal. Crime insurance is the essential policy that protects you from the enemy within.
Crime Insurance for Non-Profits: Protecting Donations and Funds
The Treasurer Who Betrayed Our Trust
I volunteer on the board of a small local charity. We were all devastated when we learned our long-time volunteer treasurer had embezzled nearly $40,000 in donor funds to pay his gambling debts. The theft threatened our ability to operate and shattered our reputation with donors. Luckily, the board had purchased a Crime insurance policy specifically designed for non-profits. It reimbursed the stolen funds, allowing us to continue our mission and demonstrate to our donors that we had safeguards in place.
ERISA Fidelity Bond Requirements vs. Broader Crime Insurance
The Bond Protects the Plan. The Policy Protects the Company.
When my company started a 401(k) plan for our employees, our lawyer told us we were legally required by ERISA to buy a “Fidelity Bond.” This bond specifically protects the retirement plan’s assets from theft by the people who manage it. My agent explained that this is different from our main Crime insurance policy. The ERISA bond protects the employees’ money. Our broader Crime policy protects the company’s money from a wider range of criminal acts. They are two separate, but equally important, coverages.
Does Crime Insurance Cover Theft by Independent Contractors? Check Policy.
The “Consultant” Who Walked Away With Our Laptop
We hired a short-term IT contractor to help with a project. He had full access to our office. On his last day, he stole a high-end company laptop worth $4,000. I tried to file a claim under our Employee Dishonesty coverage. It was denied. Our policy narrowly defined “employee” and did not include temporary staff or independent contractors. My agent showed me that for a small additional premium, we could have added an endorsement to broaden that definition. It was a lesson in matching your policy wording to your actual workforce.
Mandatory Audits or Controls Required by Crime Insurers?
To Get Insured, We Had to Get Audited
My startup grew fast, but our financial processes were a mess. When we applied for Crime insurance, the underwriter took one look at our application and said, “We can’t offer you a policy until you have an independent financial audit performed.” It was a hassle and cost us $8,000. But the auditor found several serious control weaknesses that left us vulnerable to fraud. The mandatory audit forced us to clean up our act, and in the end, it made us a stronger, safer, and insurable company.
Crime Insurance: Safeguarding Your Business from Deception and Theft
The Policy That Trusts, But Verifies
As a business owner, you want to trust your team. You have to. But you also have to be realistic about the risks of human nature. Crime insurance is the ultimate backstop for that trust. It’s the policy that lets you empower your employees while protecting your company’s financial health. It safeguards your business from the clever forger, the external scammer, and, most painfully, the trusted employee who breaks that trust. It’s a quiet, essential shield against deception and theft.