What Insurers Want to Know Before Insuring Your Warehouse Goods

What Insurers Want to Know Before Insuring Your Warehouse Goods

by | Aug 18, 2021 | Marine Cargo Insurance, Warehousing

Numerous factors go into the decision for an insurer to offer a quote for warehouse cargo insurance coverage. Let’s discuss what they want to know about your business.

Warehouse Insurance protects cargo during storage. Policies are customized based on the type of goods, mode of transport, and preferred protection. If you work with a warehouse provider to store your goods, you are trusting someone else to protect them. Since there is always something that could go wrong, getting the right insurance to keep your business protected is a must.

Warehouse coverage becomes complex when it comes to securing a policy in a hardening insurance market. A hard market is an upswing in a market cycle, in which premiums increase and the capacity for many types of insurance decreases. This can be caused by a falling return on investment for insurers, increased frequency & severity of losses, regulatory intervention against insurers’ interests, and other causes.

Do you currently have an all-risk cargo insurance policy?

An annual all-risk cargo insurance policy extends to goods temporarily stored during an ordinary course of transit. However, if goods are stored at a warehouse outside the ordinary course of transit, shippers should get a warehouse policy.

Warehouse coverage is usually not written as a standalone policy; it typically must be added to a transit policy. This is an endorsement that the shipper can add to a standard annual all-risk policy.

What is your term of storage?

Insurers don’t want shippers to store their goods in a warehouse for too long. Insurers want goods to keep moving because the longer goods sit, the more likely it is for a loss to occur.

Does the warehouse facility have fire protection?

If there are automatic protections such as sprinklers or monitored alarms in the facility, there is a lower risk of a total loss. Warehouse fires are becoming more and more of a concern for insurers after many wildfire losses in recent years, so proactive protections are essential for obtaining optimal pricing.

Does the warehouse facility have 24/7 monitoring?

If there is always someone monitoring the storage facility, this decreases the overall risk of theft and damage. Monitoring also reduces the magnitude of losses as appropriate authorities are contacted quickly. Insurers are more likely to insure goods at facilities that have taken such security measures and often will not insure a large warehouse value unless 24/7 monitoring is in place.

What are the items being stored?

If the items being stored are easily damaged, the product is riskier to insure. Flammable goods, high theft targets, or perishable goods are also considered more likely to lead to a loss. Insurers will want to know more about the facility’s maintenance and security arrangements if goods fit those descriptions.

Where is the warehouse located?

The most important thing to consider when choosing a facility is the location. A warehouse’s location and construction can be deciding between suffering substantial loss or maintaining safe inventory. It is critical to consider risks like crime, flooding, and fire when selecting a warehouse location and provider.

If a warehouse is in an area that is prone to inclement weather conditions, otherwise known as catastrophic perils (CAT) prone areas, the cargo in this facility will be risky to insure against catastrophic risks. Some examples of CAT-prone areas include along the San Andreas fault line and the Southeast Coast.

Some of the most common types of catastrophic perils are:

  • Earthquakes
  • Wildfires
  • Named windstorms & floods

Be sure to evaluate the likelihood of each of these catastrophic perils when choosing your location. The risk of a natural disaster is something that shippers can avoid by storing goods in an area with low environmental risk.

Is the warehouse close to highways, airports, and railways?

Choosing a facility in the middle of nowhere, even if the price is reasonable, is probably not the wisest decision. To ensure the smooth, cost-efficient flow of goods, your warehouse should have:

  • Airports nearby
  • Access to rail lines in good working condition
  • Easily accessible roads
  • Interconnected highways

Choosing a location without evaluating highway congestion patterns, exit ramp placement, peak traffic hours, and road safety conditions can increase accident rates, fuel consumption, and wasted time.

Download a complete guide on Marine Cargo Insurance from Trade Risk Guaranty.

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