Commercial Insurance Explained - Cover for Distribution & Warehousing
Warehouses and distribution centres are a vital cog in UK business, be it the supply chain or consumer delivery. Without sufficient support of warehousing and distribution services, many businesses’ would not be able to trade effectively leading to significant financial losses or even closure.
As critical transfer points, many distributions centres are the hub of efficiency utilising workers using vehicles to haul or store heavy loads of valuable stock and/or materials.
This high level of activity can make warehouses particularly dangerous and susceptible to a host of Commercial Insurance risks, including heightened fire exposure.
By purchasing a comprehensive warehousing and distribution insurance policy a business can protect themselves against these critical risks. We have outlined below the key areas of cover for a typical warehouse or distribution centre, however best practice is to always tailor your Commercial Insurance policy to your specific requirements.
You can insure material damage to warehousing or other premises under property insurance cover, and because distribution centres often hold a significant volume of valuable goods and equipment, property cover is vital.
The sums insured, or the specified maximum loss amount that an insurer will pay under the policy, can be very high due to a warehouse’s large size, its high concentration of stock and its specialised equipment.
Property Insurance cover is typically broken down into several main types of cover:
- Buildings can be insured by the warehouse operator/distributor or the landlord, depending on whether the facilities are owned outright or leased. Debris removal is usually included as part of your buildings or stock cover.
- Plant and machinery are typically insured by the warehouse operator/distributor. Be sure to accurately calculate the worth of your plant and machinery, as specialist plant, machinery and stock are often imported and exchange rates can often devalue certain items.
- Stock cover is crucial for your business. Depending on the type of goods or stock stored, such as a large quantity of goods regulated by strict hygiene standards, debris removal costs following an incident can be extremely high, as such it is important to plan your sum insured accordingly.
Due to the diversity of property housed in warehouses, insurers usually offer a range of additional property covers, some of which are listed below:
- Accidental sprinkler leakage
- Damage to lifted goods and collapse of racking
- Impact by own vehicles
- Deterioration of stock
Business Interruption Cover
Even a small loss can have a significant impact to a business’ supply chain, potentially bringing operations to a grinding halt. Business interruption (BI) cover can help recoup lost profits and fixed costs due to an insurable peril, providing funds to support the business through a disaster.
Business interruption cover should account for the full range of material damage perils in addition to breakdown risks. Even a loss such as a theft can impact earnings through reputational loss or downtime.
If you handle the transportation of goods to and from your warehouse, you are likely to be liable for goods in transit - transit insurance cover helps protect against this liability. If you contract out with a haulier to move goods, the contract between you and your haulier will assign liability in terms of who is responsible for the goods.
You should also be aware that standard contract terms, such as those of the Road Hauliers Association (RHA), will restrict the carrier’s liability and set a maximum compensation limit.
With the above in mind, your contract conditions will often determine the best kind of transit cover to purchase. For example, a contract that grants you all of the liability may prompt you to purchase transit cover on an ‘all risks’ basis, which covers every non-excluded risk.
Liability Insurance Cover
Insurers provide several different liability covers.
- Employers’ liability cover is mandatory by law if you have employees. It covers your liability for employee injury or death emanating from their employment with your business.
- Public liability, although not compulsory by law, should be seen as also a "must-have". Public Liability Insurance provides indemnity for third-party injury or damage as a result of the actions of your business or employees - For example, a pallet of goods falls onto a site visitor.
- Products liability provides indemnity against potential claims from third parties as a direct result of products you have supplied. Whilst you may not be producing goods yourself, as you form part of the supply chain you could quickly find that you are pulled into legal action should one, or multiple people suffer injury from a supplied product. This is particular important if you are repackaging or branding items as part of the distribution process.
- Product recall insurance covers the expenses associated with recalling a potentially injurious product from customers. This cover is particularly important for warehouse operators/distributors who work in the food and drink industry.
Motor Insurance Cover
Providing any distribution services will require you to purchase motor cover for your fleet of vehicles. Motor cover insures your vehicles and the liabilities that arise from your employees using them.
If you work directly with haulage contractors, it is likely that they will supply their own vehicles for distribution, in which case they will be responsible for insuring them under their HGV Fleet Insurance.
Working in the food and drink industry can dramatically increase your vehicle risks, as you will most likely be required to use refrigerated vehicles to transport goods.
Potential Additional Covers
A range of other risks may deem additional covers suitable for your specific requirements including:
- Money Cover
- Directors’ and Officers’ / Management Liability
- Environmental Impairment Exposures
- Legal expenses
Free Business Insurance Review
Insync specialises in cover for wholesale and distribution centres across the UK. We can Compare Commercial Insurance policies from the UK’s leading insurers, helping you find the right level of cover at the right price.
You can request a quotation online, alternatively, why not book a free review with one of our business insurance experts at a time that suits your diary.
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About the Author
I’m passionate about family, sport, technology and business.
In fact, I have always been fascinated by business, whether it was running the school tuck-shop or my Saturday job in the local store, I was always looking for ways to improve or view things differently.
I have enjoyed an amazing career fast approaching 25 years in the insurance industry, which has given me real insight into the challenges and opportunities faced by SME businesses in today’s ever-evolving marketplace.
I co-founded Insync Insurance, to offer companies a new way to buy and manage their business insurance. A synergy of digital servicing and personal expertise - utilising the latest technology to enhance relationships, not to replace them.