What is Warehouse Insurance Coverage?

What is Warehouse Insurance Coverage?

by | Dec 31, 2020 | Logistics / Shipping, Marine Cargo Insurance, Trade Topics, Warehousing

Warehouse Insurance protects cargo during storage. A cargo insurance policy can be extended to cover additional warehouse coverage, including floods, windstorms, and earthquakes. Policies are customized based on the type of goods, mode of transport, and preferred protection.

A warehouse’s responsibility is to keep their customer’s goods safe in exchange for a fee. Warehouses offer long and short-term storage to businesses for all types of cargo. Storage duration varies from days to years, depending on specific needs. Warehouse services can include packing, pickup, delivery, and unpacking on top of storage.

Suppose your goods are lost or damaged in the custody of a warehouse provider. You could face a loss in revenue of hundreds of thousands of dollars, unable to fully recoup those losses. However, warehouse cargo insurance coverage provides protection while a warehouse or fulfillment provider has your goods.

As an Importer, you know how critical it is to protect your inventory. 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 warehouse insurance to keep your business protected is a must.

Is Warehouse Coverage Included in an Annual All-Risk 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, the best coverage available for these goods is an all-risk cargo insurance warehouse policy.

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

Warehouse Coverage vs. Warehouseman Limited Liability Coverage

The difference between warehouse limited liability coverage and all-risk warehouse insurance coverage can be confusing for shippers and warehousemen.

It is crucial for shippers to understand their protection as well as for warehousemen to discuss their liability in the event of a loss initially. If the warehouse arrangement terms are discussed upfront, the shipper and warehouse provider can secure a good relationship for the future.

Standard warehouseman limited liability coverage limits liability to a small percentage of the lost or damaged cargo’s value. The warehouse provider may only be liable to pay the shipper $0.10 per pound if they are responsible for the loss. This type of loss illustrates why purchasing all-risk coverage on warehouse goods is better than relying on warehouseman liability coverage.

If a shipper’s cargo is severely damaged due to an Act of God, the damage was not the warehouse provider’s fault, and warehouse legal liability insurance would not cover the damage. The warehouse provider had no control over the situation and did not act negligently. They would not be held responsible or liable for the loss, and the shipper would not be paid for this claim. However, warehouse cargo insurance coverage would cover this, and the shipper would be reimbursed for the insured value of the damaged goods.

Ways to Minimize Risk

The path to well-controlled inventory begins with the supplier. Before your inventory arrives at the warehouse, you should have a plan to minimize risk, including these four steps:

  • Step 1: Purchase additional warehouse coverage on your cargo insurance policy.
  • Step 2: Choose a warehouse provider carefully. Be sure the provider has a detailed insurance policy of their own.
  • Step 3: Choose a warehouse location very carefully. The location of a warehouse and how it is constructed can be the deciding factor between suffering substantial loss or maintaining safe inventory. Consider risks like crime, flooding, and fire when selecting a warehouse provider.
  • Step 4: Communicate regularly with your insurance provider. Ask about the availability of additional coverage for added protection.

If you are interested in learning more about cargo insurance coverage for your warehouse goods, contact TRG today.

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

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