Property and Casualty Insurance Practice Exam

What does employee dishonesty optional coverage protect against?

1. Loss from theft by outside parties

2. Loss of business personal property due to employee actions

3. Loss due to natural disasters

4. Loss of customer data

The correct answer is: Loss of business personal property due to employee actions

Employee dishonesty optional coverage is designed to protect businesses from financial losses incurred as a result of dishonest acts committed by their employees. This can include theft, fraud, or any other actions where an employee misappropriates funds or property belonging to the business. The correct answer pertains specifically to losses that arise directly from the actions of employees, such as stealing cash or property belonging to the business or falsifying documents for personal gain. This type of coverage is vital for businesses because it addresses risks that are internal rather than external, focusing on the potential for loss specifically related to employee malfeasance. In contrast, losses from theft by outside parties, natural disasters, or loss of customer data fall into different categories of coverage and are generally addressed by other policy types, such as general liability or property insurance—not employee dishonesty coverage. Understanding this distinction helps businesses to properly assess their insurance needs according to the unique risks they face.