Arranging Stock insurance for your business.
If you are a retailer, a manufacturer, a wholesaler, or generally a business that holds or uses products then you will almost certainly be holding stock, even if the stock belongs to someone else such as free issue materials or if they belong to a customer.
When it comes to insurance the term stock can incorporate a wide spectrum of items, but this can very much depend on what your business does.
Selling coffee and cakes is more than just … well coffee and cakes.
Think about it, you would have a few irritated customers if you were selling your coffee without milk, sugar and that syrupy stuff, likewise cakes with no options, plates without napkins.
The stock used in your business isn’t just the items that you are selling, consider all the cleaning products that you have to use, and that’s just the start, what about bigger businesses?
For larger businesses such as manufacturers, well this gets big, you have raw materials, work in progress, finished stock awaiting collection or delivery and in some cases, you may have customer’s goods if you offer a repair or refurbishment service.
What is Stock Insurance?
Stock insurance provides cover against the many different types of exposures you or your business may have, these are usually referred to as Perils, this could be from fire, perhaps storm damage where there is damage to your premises by high winds for example, and in more recent times flood has become more prevalent.
Stock can be high or low risk, insurance premiums can reflect this, high risk could be thief attractive goods such as jewelry, technology, and other high-value products so theft insurance is really important. On the opposite end of the spectrum fireworks, all very colorful if there is a fire, flammable chemicals, the list is endless.
How is Stock covered?
There are many ways to cover the stock in your business, it can depend on the type of business you have. As an example, a high street retailer might have a Shop Package Policy or Retailers Insurance. Stock is covered as standard, you just decide on the amount to cover for.
For manufacturers you might have a combined insurance policy, where stock is an option, many other policies incorporate stock, you just need to calculate how much stock you have and your broker will decide on the best way to insure them for you.
How to calculate your Stock
First and foremost in almost all instances, Stock insurance is covered on what’s called an Indemnity Basis, in simple terms, this means that if the item of stock has cost £1.00 and that item is lost due to an insured peril, remember, fire, storm, flood, etc then the insurer will reimburse you for that loss, they will pay you your £1.00 back. Normal Stock Insurance does not pay for your profit or mark-up on the stock item, this is important to know so you don’t over-insure.
Like most businesses you will do a stock take the old way, the laborious task of counting, unless you have an elaborate stock control system. Either way, making sure that you know exactly what you have and you can prove it, that’s the important thing, you will need to produce evidence that you had the stock in the first place…
Can I cover customers’ goods or goods in trust?
Yes, not a problem, an insurer’s policy will usually include customers’ goods within the definition of stock, but it must be checked. If you have customer’s goods it is prudent to agree who is responsible for them, it’s unwise just to assume. If you cover them or you expect your customer to then you need to agree on this and make sure your contracts and your insurance reflect this.
Does Stock have to be insured on a contents policy?
Not necessarily no, a Marine Cargo Insurance policy can incorporate what is referred to as Stock Throughput Insurance. As an example, if you have a warehouse you may purchase a stock that passes through on its journey to the customer, a separate stock policy would not need to be in place unless the stock ends at the warehouse and is a speculative stock. A stock throughput insurance doesn’t work for all and therefore you must seek expert advice.
Free issue materials
These are exactly as the name suggests, the materials you use might be issued free for you to use, as an example you might provide assembly services to your customer, your customer provides various components and you put together the final part. Again, it’s important to know who is agreeing to cover the goods whilst at your premises, you or your customer.
Seasonal Increases
Depending on your business type it could mean that you need to increase your stock at certain times of year to cope with the demand, Easter, Christmas, and other celebrations. If this is the case it’s prudent to ensure that a policy includes seasonal increases that fit with your high demand points. There is no point in having a seasonal increase when it falls outside your business’s busiest period.
Refrigerated Stock
As the name suggests this would provide cover against losses from both Refrigerated and Frozen stock. A freezer shop, for instance, a specialist distributor of frozen foods or a manufacturer that needs to keep their stock frozen. If your refrigeration stops working you could lose a lot of foodstuffs. Likewise, it could be pharmaceuticals or other products that need to be kept cold or frozen.
For small amounts of stock, these might be able to be covered on a package insurance policy say for a retail outlet, or for bigger installations a specialist deterioration of stock insurance can be obtained.
Goods in Transit
Quite a separate cover but don’t forget about getting stock from one place to the next, whether you are collecting it or delivering it. This type of cover can be easily catered for under many different insurance policies, a retailers package, and what is known as a Commercial Combined insurance.
As we can see, Stock Insurance can cover many things, it can be protected by many different types of insurance policies.
Want to discuss this further? Arranging Stock Insurance for your business is usually simple and straightforward, speak to us about your needs.
