Key Takeaways
- Employee embezzlement can happen in dental practices of any size, including those with longtime, trusted staff.
- Employee dishonesty coverage, sometimes called employee theft or fidelity coverage, can help protect against certain financial losses caused by employee theft.
- Standard business insurance policies may not provide the protection practice owners assume they have.
- Insurance is only one part of protecting your practice. Financial oversight and internal controls are equally important.
When you think about the insurance your dental practice needs, malpractice, property, liability, and cyber coverage probably come to mind. But what about protection against theft by one of your own employees?
It’s a risk many practice owners don’t spend much time thinking about, particularly when they have a small, close-knit team. Unfortunately, employee embezzlement is a real concern in dentistry.
At a recent Academy of Dental CPAs (ADCPA) conference, Lynn sat in on a discussion about employee embezzlement and an insurance option that deserves more attention: employee dishonesty coverage, sometimes referred to as an employee dishonesty rider.
It’s worth understanding what this coverage does, whether your practice has it, and what other steps you can take to reduce your exposure.
Why Dental Practices Can Be Vulnerable
Dental practices handle a steady flow of financial transactions, including patient payments, insurance reimbursements, refunds, credit card transactions, and vendor payments. In many practices, a relatively small number of employees manage much of this activity. An office manager or bookkeeper may have access to the practice management system, bank accounts, payment processing, and financial records.
That concentration of responsibility can create opportunities for theft, particularly when the same person handles transactions and reconciles the records without independent review. The problem is more widespread than many dentists realize. In a 2020 ADA survey, 48% of dental practice respondents reported experiencing embezzlement.
Employee theft isn’t always immediately obvious, either. It may involve diverted patient payments, fraudulent refunds, altered financial records, unauthorized purchases, or payments to fictitious vendors. And the person responsible may be someone the practice owner has worked with and trusted for years.
What Is Employee Dishonesty Coverage?
Employee dishonesty coverage is a type of commercial crime insurance that protects businesses against certain losses resulting from employee theft. According to the International Risk Management Institute, it generally covers theft of money, securities, or other property by employees, subject to the policy’s terms and limits.
Depending on the policy, this protection may be included in a commercial crime policy or added through an endorsement to another business insurance policy. However, not all policies are structured the same way. Coverage for employee theft may differ from protection against forgery, computer fraud, or fraudulent electronic funds transfers. Some of those risks may require separate coverage.
Policy definitions can differ. For example, whether theft involving a temporary employee, independent contractor, or outside bookkeeper is covered may depend on how the policy defines an employee. That’s why it’s important to review your actual policy rather than assume your general business insurance provides adequate protection.
Questions to Ask Your Insurance Agent
If you haven’t reviewed your employee dishonesty coverage recently, this is a good time to do so.
A few questions worth asking include:
- Does our current policy include employee theft or employee dishonesty coverage?
- What types of theft or embezzlement are covered, and what exclusions apply?
- What are our coverage limits and deductible?
- Are temporary employees, contractors, or outsourced bookkeeping personnel covered?
- Does the policy cover losses involving electronic transactions, fraudulent transfers, or forged checks?
- What documentation and reporting deadlines apply if we discover a loss?
You should also consider whether your coverage limits are appropriate for the size of your practice and the potential financial exposure. The goal isn’t simply to have coverage, but to understand what protection you’re purchasing and where gaps may exist.
Insurance Doesn’t Replace Financial Oversight
Even with appropriate insurance, preventing employee theft should remain a priority.
The Association of Certified Fraud Examiners’ 2026 Report to the Nations found that more than half of the occupational fraud cases studied involved either a lack of internal controls or the override of existing controls.
For dental practice owners, basic safeguards can make a meaningful difference. These include separating responsibilities for receiving payments, recording transactions, and reconciling accounts whenever possible; reviewing bank and credit card statements independently; limiting access to financial systems; and regularly examining refunds, adjustments, and write-offs. Practice owners should also ensure that someone independent of day-to-day payment processing reviews financial activity and investigates unusual transactions.
These procedures don’t have to be complicated, but they do need to be consistent. And while trusting your employees is important, financial controls protect everyone by creating accountability and reducing opportunities for misconduct.
Protect Your Practice Before There’s a Problem
Employee embezzlement can create serious financial consequences, particularly when theft continues undetected for an extended period. Employee dishonesty coverage may help limit the financial damage, but it shouldn’t be your only line of defense.
Take time to review your insurance coverage with your agent and your financial controls with us. Together, those conversations can help identify potential gaps before they become costly problems.
Are you confident your dental practice has appropriate financial safeguards in place? Edwards & Associates works exclusively with dental professionals to help them understand their financial operations, improve oversight, and identify potential risks. Contact us to discuss ways to strengthen your practice’s financial controls.
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