Haris Ashley
The rise of theft in retail stores has caused concern for businesses of all sizes. The National Retail Federation's 2022 Retail Security Survey revealed that theft, gift card fraud, inventory mismanagement, and employee dishonesty resulted in a staggering $95 billion in losses. This has prompted discussions on whether shops are insured against theft. Commercial property insurance is an option that covers losses due to theft, fire, storm damage, vandalism, and vehicle damage. It also includes business personal property coverage for goods, gear, and inventory. Additionally, employee dishonesty coverage, offered as an add-on by some insurers, reimburses businesses if employees steal. While shoplifting may not be covered due to the difficulty in filing claims, theft is generally included in commercial insurance policies, protecting businesses from financial loss.
| Characteristics | Values |
|---|---|
| Commercial property insurance | Protects shop and contents against losses due to fire, storm damage, theft, vandalism, or damage from vehicles |
| Business owners policy (BOP) | Covers losses due to theft but does not include employee dishonesty coverage |
| Employee dishonesty coverage | An add-on offered by some insurers to reimburse for employee theft of merchandise or cash |
| Liability insurance | Covers accidents affecting customers or visitors to the store, including injuries related to retail crime |
| Business interruption insurance | Covers lost revenues if the business is closed for a period of time after a covered loss |
| Shoplifting | Not typically covered by commercial insurance policies due to the difficulty in filing claims |
| Theft coverage | Varies depending on the terms and conditions of the commercial property insurance policy |
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What You'll Learn
Commercial property insurance
While commercial property insurance covers theft by external parties, it typically excludes employee theft. To protect against employee theft or fraud, businesses may need to purchase additional coverage, such as employee dishonesty coverage or commercial crime insurance. Employee dishonesty coverage, also known as a commercial crime endorsement, reimburses businesses if an employee steals merchandise or cash, although a police report may be required for a payout. Commercial crime insurance covers losses due to employee theft of business assets, cash, or financial fraud, including forgery and embezzlement.
In addition to commercial property insurance and employee dishonesty coverage, businesses can also consider other types of insurance to protect against theft. Cyber insurance, or cyber liability insurance, covers electronic communication and financial transactions, protecting against wire fraud, cyber attacks, ransomware, and data breaches. Business interruption insurance covers lost income due to covered events, such as fires or storms, which may be related to theft incidents. Inland marine insurance covers business property, including products, tools, and equipment while in transit, stored off-site, or used at a client's location.
To ensure adequate coverage, business owners should carefully review their current policies and understand the specific types of theft covered. It is common to require multiple policies to fully protect a business from theft and other risks. Additionally, proper documentation of items and their value is essential for successful reimbursement claims, as insurance companies may deny claims due to lack of proof of possession or theft.
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Employee dishonesty coverage
Shops can insure themselves against theft in several ways. Commercial property insurance, for example, covers losses due to fire, storm damage, theft, vandalism, and vehicle damage. Liability insurance, on the other hand, covers accidents that affect customers or other visitors to the store, including injuries related to retail crime.
To make a claim, the insured organization must demonstrate that it has suffered a loss due to an employee's actions. Some policies may also require a police report and evidence of manifest intent, excluding crimes that result from negligence or incompetence. While employee dishonesty coverage can provide financial protection, it may not safeguard a company's reputation or compensate for certain incidents such as data breaches, accounting errors, government seizures, legal fees, or vandalism.
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Business interruption insurance
Shops can insure themselves against theft in several ways. Commercial property insurance covers the shop and its contents against losses from theft, fire, storm damage, vandalism, and more. It can also help pay for repairs or replacements in the event of property damage from a burglary attempt. However, it does not cover employee theft or crimes targeting cash, accounts receivable, or other financial assets.
Commercial crime insurance covers the gap left by commercial property insurance. It helps businesses recover from employee theft of business assets or cash, forgery, embezzlement, or other financial scams. Employee dishonesty coverage can be added to commercial property insurance or a business owner's policy as an endorsement. It covers employee theft of cash, merchandise, or business property. Small businesses that handle financial transactions with customers could benefit from this type of insurance.
Cyber insurance protects digital business assets from wire fraud, cyber attacks, ransomware, or data breaches. It can also protect electronic communications and financial transactions from hackers.
Business theft is a serious issue that can put a company's future at risk. Forbes Advisor reports that 90% of small business retailers nationwide have experienced theft at their stores. Theft accounts for 40% of retail shrink, and experts refer to large-scale thefts as organized retail crime (ORC). The National Retail Federation's 2022 Retail Security Survey showed that theft, gift card fraud, inventory mismanagement, and employee dishonesty resulted in $95 billion in losses last year. Small businesses have been hit the hardest, with giants like Target and Walgreens also affected.
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Shoplifting
Shops can insure themselves against theft by purchasing commercial property insurance, which covers losses due to theft, among other things. They can also purchase liability insurance, which covers accidents affecting customers or other visitors to the store, and business interruption insurance, which covers lost revenues if the business is closed for a period of time after a covered loss. Additionally, shops can purchase employee dishonesty coverage, which is an add-on that reimburses the business if an employee steals merchandise or cash.
Stores use various strategies to reduce shoplifting, including storing small, expensive items in locked glass cases; attaching items to shelves or racks; using magnetic or radio sensors or dyepacks; installing curved mirrors or video cameras; hiring plainclothes detectives and security guards; and training employees to detect potential shoplifters. Shoplifters range from amateurs acting on impulse to career criminals who steal for income or to resell on the black market.
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Robbery
However, it is important to note that insurance policies can vary, and some may offer named perils coverage, only covering specific risks such as fire or theft. Additionally, shoplifting, which is the theft of goods during business hours, may not always be covered by commercial insurance policies. In the case of shoplifting, it can be difficult to file a claim as the theft often goes unnoticed until after the fact.
To protect themselves from financial loss due to robbery or theft, business owners are advised to maintain accurate and detailed inventories of their stock and assets. This includes creating digital files of scanned receipts, taking photos and videos of equipment and merchandise, and keeping records of the value of their inventory. These measures will help business owners in the event that they need to file an insurance claim and demonstrate the extent of their losses.
Another important consideration for business owners is employee dishonesty. In some cases, employees may be involved in theft or retail crime. Insurance companies may offer employee dishonesty coverage as an add-on to their policies, reimbursing business owners if an employee is found to have stolen merchandise or cash. However, a police report may be required to receive a payout in such instances.
Overall, while commercial property insurance can provide financial protection against robberies and theft, it is important for business owners to carefully review their insurance policies, understand the specific coverages and exclusions, and take proactive measures to protect their assets and inventory.
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Frequently asked questions
Commercial property insurance covers shops against theft. This includes burglary, robbery, shoplifting, and employee theft.
Commercial property insurance covers losses due to fire, storm damage, theft, vandalism, or damage from vehicles. It covers damage to the building, signage, furniture, equipment, and inventory.
Employee dishonesty coverage, also called a commercial crime endorsement, is an add-on offered by some insurers. It reimburses the business if an employee steals and may require a police report to get a payout.
