There is no standard limit of liability for any of the coverage sections of a commercial crime policy. Instead, the policyholder is encouraged to select a limit appropriate to its organization's exposure to risk.
For many institutions, the primary crime threat is employee dishonesty. In assessing vulnerability to loss, remember that:
- A commercial crime policy insures not only money and securities, but also other property such as office equipment and supplies, computers, and fine arts.
- The policy covers the acts of people other than employees in the strictest sense.
- Your money and securities exposure extends beyond mere petty cash on hand and may include bank and investment accounts.
All loss attributable to a single person or dishonesty pattern is treated as a single occurrence when policy limits and deductibles are applied. This holds true regardless of the number of individual dishonest acts or time span involved.
Do you have enough fidelity protection?
The leaders at St. Michael's Church thought they did. The church carries employee dishonesty limits of $10,000 every year over a 10-year period.
This year, they discovered that a volunteer with access to church funds has been steadily taking an average of $5,000 a year for the past decade—a cumulative loss of $50,000. Since the dishonesty scheme will be treated as a single occurrence, however, recovery will be limited to the current policy limit of $10,000, less the applicable per-loss deductible.
Moreover, the amount of available coverage is the face amount of the policy when the loss is discovered. It's important to arrange enough protection for the once-in-a-lifetime dishonesty scheme that most churchgoers find unimaginable.
The policy limit you choose should reflect your vulnerability based on such considerations as money-counting procedures, check-signing protocols, access to financial accounts, and annual audit by an outside CPA.
A common rule of thumb advocates an employee dishonesty limit equal to at least five percent of total assets. For churches, another yardstick is a limit equal to 25 percent of total annual revenue from all sources.
Naturally, this amount will vary according to your security and cash management practices.