Business Warehouse Insurance Requirements

Warehouse Insurance Requirements for Freight Forwarders

Warehouses play a crucial role in the economy and are vital to many industries. They house supplies, materials and finished products that consumers and businesses need. Warehouse owners provide customers with storage space, and it is their responsibility to ensure their facility is adequate.

Owning a warehouse comes with its own set of risks, especially when the space is shared with multiple entities. Warehouse insurance can help ensure that owners are covered in case the worst happens.

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Do you need business insurance for a warehouse?

Warehouse insurance comes at an added cost to warehouse owners, and budget concerns may make some owners reluctant to purchase coverage. However, it’s crucial for every business to ensure they have adequate insurance, and that includes warehouses.

Why? Because without insurance, you put your business at risk.

  • If someone is injured while at the warehouse, you will be held liable.
  • If a worker is injured while on the job, you will be liable.
  • If your equipment or property is damaged, you will have to pay for repairs out of pocket.

Warehouse business insurance can also provide coverage or legal representation if the warehouse is sued.

Having to pay for any of these costs out of pocket could easily bankrupt a business. Insurance protects against this financial risk.

Insurance is important, but it’s even more important to make sure that you have the right type of coverage. Let’s take a closer look at what types of insurance warehouses should have.

Business Insurance for Warehouse Freight Forwarders

Warehouse insurance packages should include coverage for both liability and property. While every warehouse is different, most can benefit from the following coverages.

Commercial Property Insurance

A commercial property policy will cover losses caused by fires, natural disasters, theft and more. Covered assets may include:

  • Forklifts
  • Freezers
  • Buildings
  • Refrigeration units
  • Storage racks
  • Furniture
  • Software and data
  • Other equipment

General Liability

Every warehouse should also have general liability insurance, which protects against:

  • Physical damage
  • Third-party bodily damage
  • Copyright violations
  • Legal defense

Business Owner’s Policy

Many warehouse owners opt for a Business Owner’s Policy because it combines liability, property insurance and business interruption insurance into one policy.

As the warehouse business grows, additional coverage can be added to cover more risks.

Warehouse Legal Liability Insurance

Warehouse legal liability coverage is an insurance policy for warehouse storage operations. With this insurance, businesses are covered as a bailee. Bailees are businesses that are entrusted with other people’s property.

Legal liability covers:

  • Direct physical loss
  • Damage of property

Typically, these policies cover the property while it’s being stored, packaged, cross-docked, labeled or undergoing any other service by the bailee.

While coverage may vary from one insurer to the next, legal liability policies typically cover:

  • Tangible property, including tools, forklifts, computers, rack systems, hand trucks, networking systems and more.
  • Damage or loss of equipment and fixtures in leased buildings.
  • Physical loss or damage to newly acquired property for a certain period of time.
  • Accounts receivable. If a covered event makes the warehouse unable to collect payments from customers, this insurance will provide relief and may help cover the cost of replacing lost accounts receivable records.
  • Documents, data and software. If they are lost, damaged or destroyed, this policy will provide coverage to repair, reproduce or replace them.

Legal liability will typically cover:

  • The policyholders’ vehicles
  • Employee dishonesty
  • Property that’s transported by other vendors

Workers’ Compensation

If you have employees, you’ll need workers’ compensation insurance. Most states require this coverage, which will cover the cost of medical care and lost wages if an employee is injured on the job.

Marine Cargo Insurance

If you own multiple warehouses and will be transporting goods between them, it’s worth considering marine cargo insurance. Marine cargo insurance will cover the repair or replacement of goods that are lost or damaged while in transit from one warehouse to the next.

Marine cargo insurance policies should have a warehouse-to-warehouse provision that protects the items from vandalism, theft, fire and other disasters while moving from the departing warehouse to the receiving one.

Warehouse Inventory Insurance

Of course, warehouses will also want coverage for the goods stored inside. Warehouse inventory insurance will protect against damage to inventory caused by a covered peril, like vandalism, theft or severe weather.

Warehouse inventory insurance is sometimes referred to as warehouse contents insurance.

Additional Coverage Options

Warehousing insurance policies may also offer the following coverage either as part of their standard policy or add-on coverage.

Debris and Pollution Removal

Policies may include coverage for the removal and cleanup of debris and pollution after a covered loss.

Earned Freight and Storage

Coverage may be included for earned freight and storage charges that you’re unable to collect because of a covered loss.

Missing Property

If property goes missing for reasons unknown, your insurance policy may help cover the cost of replacement.

Losses Caused by Temperature Changes

If heating or cooling systems cause humidity or temperature changes that damage property, insurance may cover the loss.

Transportation Insurance Considerations

Transportation companies will typically have their own coverage that should, theoretically, cover goods that are in transit to and from warehouses.

However, it’s never a bad idea for warehouse owners to have their own coverage as an added layer of security.

Warehouse owners may also want to consider having a commercial auto policy to cover any motor vehicles that are owned by the business. If an accident occurs while on the job, this insurance will cover the cost of repairs, replacement and medical care for injuries.

What Factors Affect the Cost of Warehouse Insurance?

The cost of coverage will vary depending on a number of factors, including:

  • Location
  • Types of goods being stored
  • The number of employees you have
  • The size of your warehouse

Costs can range anywhere from $850 to $1,100+ for larger warehouses.

Adequate warehouse insurance will help protect against damages and losses that could bankrupt a business. Like any other business, warehouses face many risks that can be mitigated with the right insurance policy. The costs are negligible, and in most cases, coverage can be customized to meet the warehouse’s needs and budget.

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