What does crime and fidelity insurance cover for apartment properties?

Crime and fidelity insurance protects apartment owners from financial losses caused by criminal acts, including employee dishonesty, theft of money and property, forgery, computer fraud, and funds transfer fraud. For apartment properties, common covered scenarios include a property manager embezzling rent collections, an employee stealing maintenance supplies or equipment, forged checks drawn on the property's operating account, and fraudulent electronic transfers from the property's bank account. The ISO Commercial Crime Policy (CR 00 21) provides the standard form used by most insurers, with individual coverage parts for employee theft, forgery, computer fraud, and funds transfer fraud.

Employee dishonesty (fidelity) coverage is the most commonly needed component for apartment owners. Property managers and on-site staff handle significant amounts of money through rent collections, security deposits, and vendor payments. A dishonest employee in a position of financial trust can cause substantial losses before the theft is detected. Fannie Mae's Multifamily Selling and Servicing Guide (Part III, Chapter 6) requires fidelity bond coverage for property management entities handling funds on DUS-financed properties, and Freddie Mac's Multifamily Seller/Servicer Guide (Chapter 58) imposes similar fidelity coverage requirements.

The policy also covers losses from outside criminal acts such as robbery, burglary, and computer hacking that results in theft of funds. Social engineering coverage, which covers losses from schemes where criminals impersonate vendors or executives to redirect payments, is increasingly important and is available as an endorsement on many crime policies. Coverage limits should be set based on the amount of money and property that employees have access to and the potential exposure from a sustained period of undetected theft.