Forgery Coverage

Example

“When someone stole and forged several of the company's checks totaling $15,000, their commercial crime policy's forgery coverage reimbursed the full amount stolen from their bank account.”

Memory Tip

Think 'Fake Paper Protection' - forgery coverage protects you when someone creates fake financial papers with your information.

Why It Matters

Check fraud and forgery crimes cost businesses and individuals billions annually, and banks often place liability on account holders for forged items. Having forgery coverage provides financial protection and peace of mind, especially for businesses that issue many checks or handle significant cash flows where forged instruments could cause substantial losses.

Common Misconception

Many people assume their bank will automatically reimburse them for forged checks, but banks often place liability on account holders, especially businesses, if the forgery is not detected quickly. Forgery coverage provides protection when banks refuse to reimburse forged items or when the recovery process is lengthy and expensive.

In Practice

A small business discovers that a former employee stole blank checks and forged the owner's signature on five checks totaling $8,500. The bank refuses to reimburse the business because they claim the forgeries should have been detected sooner. The company's forgery coverage pays the full $8,500 loss plus $1,200 in legal fees spent trying to recover the money, minus a $500 deductible, providing a net recovery of $9,200 and preventing serious cash flow problems.

Etymology

The term combines 'forgery' from Old French 'forgier' meaning 'to fabricate' with 'coverage,' reflecting protection against financial crimes involving falsified documents that became more prevalent with modern banking systems.

Common Misspellings

Related Terms

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