Insurance Advisory Newsletter: EMPLOYEE FIDELITY INSURANCE – Jan 2022
Growing and developing a successful business is usually a complex experience, filled with numerous risks. One of the major risks that a business usually faces is the ‘Breach of Trust” by their employees. A business can protect itself against any loss caused by the dishonesty or fraud by an employee by availing a “Fidelity Insurance”.
Small and medium sized companies are vulnerable to these instances due to a less formal structure and a more open and closer relationship with their employees, which can provide avenuesto take undue advantage of employers trust.
WHAT IS COVERED UNDER FIDELITY INSURANCE?
The following coverages/ inclusions are covered under a Fidelity Insurance:
1. An act of theft committed by one of the insured employees is covered under such insurance. This coverage is extended to assets stolen and also to the claims made by any customer (or third party) affected by such theft.
2. An act of forgery or embezzlement of the organizations’ funds by the employee.
3. An act of misusing the position of an employee for personal gain.
4. Any other act of dishonesty by an employee.
5. Fraudulent and dishonest acts, including forgery, computer fraud by any named employee leading to either loss of money, property, securities or any other assets, and even loss to customers is covered under a Fidelity Insurance Policy.
WHAT IS NOT COVERED UNDER FIDELITY INSURANCE?
A Fidelity Insurance Policy does not cover the following losses:
- Willful acts or gross negligence on the part of the company
- Non-observation or the relaxation in the system of check and balances
- Consequential or indirect loss or damage
- Contractual or legal liability of any kind
- Trading, stock- taking shortages; any loss not caused by dishonesty or fraud
- Direct or indirect trading of securities
- Acts of terrorism
DIFFERENCE BETWEEN CRIME INSURANCE AND FIDELITY INSURANCE
FIDELITY INSURANCE CRIME INSURANCE
1. Coverage provided for internal fraud only.
2. Internal fraud covers dishonest or fraudulent acts by an employee(s).
3. Coverage is extended to employees on either the basis of their names or their designation.
4. Excludes computer fraud, loss of data, theft or malicious damage due to viruses, losses from unidentifiable employees.
5. Coverage for claims preparation and cost of recovery are optional.
1. Coverage provided for internal fraud, external fraud & defense costs.
2. External fraud covers acts such as in- transit theft, onpremises theft, forgery of an instrument, counterfeiting, funds transfer fraud, computer fraud and company issued credit card fraud.
3. Coverage is extended to all employees on an unnamed basis.
4. Covers computer fraud, loss of data, theft or malicious damage due to a computer virus, losses from unidentifiable employees.
5. Covers costs for the claims preparation and costs of recovery.