If a stranger breaks into your business and takes cash or
property, your insurance will probably cover it. But what if an
employee steals from you? Most business insurance packages include
employee dishonesty coverage, but it may not be enough.
The limit on employee dishonesty coverage in most standard
policies is $25,000. That's a drop in the bucket if your
bookkeeper embezzles several hundred thousand dollars. James T.
Harrison Jr., president of Florida Insurance School-Continuing
Education Inc. in Tallahassee, Florida, has this advice:
- Determine what your potential exposure is and increase your
coverage. Your insurance agent and your accountant can help
with this evaluation. "Buy as much coverage as you can
afford," Harrison recommends.
- Implement strong internal controls and audits. In
addition to this being your best defense against theft, you
can't get coverage without showing your due diligence.
- Understand the strict definition of employees in the
standard policy language. If you use leased workers,
independent contractors, temporary staffers or volunteers, they may
not be covered unless you add an endorsement to your policy. If you
change the status of your workers-for example, if you decide to
convert your existing employees to leased employees-notify your
insurance agent immediately.
- Make sure other insurance protects your nontangible
assets. Employee dishonesty coverage excludes intellectual
property.
Jacquelyn Lynn is a freelance business writer in Orlando,
Florida.
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Originally published in the September 2002 issue of Entrepreneur Magazine