Insurance Risk Management

If you’re not careful you may be woefully under covered in the areas of Employee Theft or Business Interruption

By Mark Johnson
Originally Posted: June 10, 2010

I spent the day learning from two experienced insurance agents about about the commercial insurance industry.  The underlying issue within the commercial insurance industry is the lack of knowledge and exposure many businesses have in the areas of risk, particularly with employee theft.

Employee theft is a clause embedded in most commercial policies, typically limiting the total loss from any occurrence of theft to $10,000.  However, that limit is often woefully inadequate at the time of loss because many thefts and embezzlements go undetected well into a loss in excess of $100,000.  But with the way this clause is typically written, the insurance company will only cover $10,000, leaving the business to bear the brunt of the crime’s substantial damage.

Another complicated area that is misunderstood is insurance for business interruption.  It is important that the policyholder understands how this insurance will be determined and what the coverage will actually pay in the case of business interruption.  A good insurance broker should be able to answer these questions with specific details and calculations.

An independent third party such as a certified fraud accountant can provide objective advice that may well be worth the cost in order to assure proper insurance coverage over specific risks.

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