Understanding Warehouse Insurance - What, Why & Cover.
Updated: Feb 11
Warehouses are an integral part of the manufacturing and distribution process, but they also come with risks that can impact a business. To protect against these risks, Warehouse Insurance is a must for any manufacturer, importer, exporter, or merchant with space for goods stored in one place.
What is Warehouse Insurance?
Warehouse Insurance is a type of Property Insurance designed to meet the specific needs of these types of businesses. It provides comprehensive protection for commercial stock, allowing business owners to get reimbursed for any losses they may incur due to unforeseen disasters. It includes damage to the warehouse building, inventory, machinery and equipment, furniture, and other assets.
Why do businesses need Warehouse Insurance?
Whether it's an unexpected fire, an explosion, or a natural disaster like a flood or earthquake, these events can cause irretrievable damage to goods, machinery, equipment, and the warehouse building. The financial loss triggered by such destruction can force a company out of business. That's why manufacturers and warehousing corporations need to have Warehouse Insurance.
Riots, strikes, intentional damage by a third party and theft also pose a threat. These risks can cause significant financial losses for the business, which is why it has become a necessity to have coverage.
What gets covered in Warehouse Insurance?
Warehouse Insurance coverage includes important assets stored or employed at the facility, such as:
Building structure, including walls, fences, and foundations
Inventory of goods, including perishable goods, electronic products, garments, and medical supplies
Machinery and equipment, including forklifts, cranes, service carts, and other tools
Furniture, desks, fixtures, and glass panes
Pipelines, security systems, air conditioning, and electrical installations
Water tanks and generator rooms
Stock stored in open premises (inside the boundary wall)
Important documents or cash on the premises (up to a limit).
Add-ons of Warehouse Insurance
Warehouse Insurance can also provide additional coverage for several other risks with the help of add-on covers. Some of the most common add-on covers include:
Burglary and Theft coverage: This will cover any loss of goods, machinery, tools, etc. On account of a robbery, theft, or similar event
Money Insurance: Also known as Cash Insurance, this add-on policy can help recover any loss of cash or cash equivalents during the ordinary course of business
Loss of Profit Insurance: Under this policy, the policyholder can get reimbursed for any consequential loss of gross profit, or increased cost of working that may arise out of the occurrence of a covered event like fire, floods, riots, etc.
Machinery Breakdown Insurance: Some insurers also offer a separate Machinery Breakdown Insurance policy that helps cover repairs or replacement costs for machinery and equipment damaged during normal operations
What gets excluded from Warehouse Insurance?
Warehouse Insurance includes some exclusions. It means that it will not provide coverage for any damage to warehouse property under specific circumstances. Some examples of exclusions that may apply include:
Damage caused by wear and tear, gradual deterioration, or normal ageing of the warehouse property
Loss or damage caused by acts of war or nuclear hazard
Loss or damage caused by the warehouse owner's intentional actions or gross negligence
Loss or damage caused by government action or enforcement of law
It's essential to fully understand these exclusions when purchasing a Warehouse Insurance policy, as they will determine the scope of coverage and what risks are covered.
Benefits of having Warehouse Insurance
Warehouse Insurance offers a variety of benefits to help protect and safeguard your commercial assets, such as:
Protection for your stock: Warehouse Insurance can reimburse you for any losses to goods stored in your warehouse during the policy period, helping to safeguard one of your most important assets
Coverage against a wide range of risks: This type of insurance offers protection against various hazards including natural disasters, man-made events and other perils, providing peace of mind for your business
Affordable premium: In many countries, including India, the cost of this type of insurance can be very reasonable making it an accessible and cost-effective way to protect your business and its assets.
In summary, Warehouse Insurance is essential for manufacturers and warehousing corporations in order to protect against potential financial loss from disruptions. It provides comprehensive coverage for commercial assets and can be extended with additional add-on coverage to protect against multiple risks.
*Businesses should work closely with their insurance provider to make sure that they have the right cover in place to protect their assets and manage potential risks effectively.
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