Charter schools may not give too much thought to Crime coverage, but it is one of the more underestimated needs for your insurance portfolio. Frequently, schools opt out of this coverage or carry the bare minimum, because they may not really understand how it protects against fraudulent impersonation, computer fraud, robbery, burglary and the most common, employee theft. Without Crime coverage, or being underinsured, you may even be out of compliance by law to secure faithful performance coverage, as in the case of a public official or employee to faithfully execute duties.
Basically, Crime coverage reimburses you, as the insured party, for a loss due to theft of monies and securities. Commonly, the coverage is applied for employee embezzlement, but it is also protection against funds transfer fraud or fraudulent impersonation.
"Crime Coverage isn’t just about embezzlement; it also covers financial fraud."
Recent experience has shown more frequent occurrence in claims where a school is notified by email from a vendor providing new payment instructions, but unfortunately the email is sent by an impersonator. When the school’s actual vendor calls 45 days later to follow up on payment, they’ve soon realized that that the “new” instructions were from a fraudulent impersonation of the actual vendor. The agency still owes the vendor and also suffered a loss for paying the fraudster. Crime coverage can cover such a loss, but a school’s best practice is to prevent the loss in the first place. By employing a two-step verification process to rule out any potential fraud, you should always directly call your known contact at the vendor to verify that the new payment information received is legitimate.
Many charter schools have much larger exposures to their Crime risks than the bare minimum limit of $1 million. We suggest you work with your broker to assess the degree of risk you are willing to take on and calculate the cost of risk for the coverage you’re willing to purchase. Buying larger limits needed to adequately cover your actual exposures will usually not be that costly. Premiums can also be reduced by demonstrating your commitment to staff training and implementing strong best practices to prevent employee theft, cyber crimes like phishing, and other financial fraud.
