Warehouses come with unique risks and in turn, require specific insurance policies.
Our guide below covers everything you need to know about warehouse insurance including what warehouse legal liability is, what other coverage is required, how much it costs, and more.
For those just looking to quickly protect their business, here are our top recommendations.
Warehouse insurance is a collection of commercial insurance policies that protect 3PLs, freight forwarders, and other businesses operating a warehouse, fulfillment center, distribution center, or similar facility.
Warehouse insurance is sometimes used interchangeably with a specific type of coverage, warehouse legal liability insurance. However, warehouse legal liability insurance will not provide sufficient coverage by itself and additional coverage will be required for any business running a warehouse facility.
Like most businesses, warehouses require some of the common commercial coverages such as general liability, property insurance, and workers compensation. However, most warehouses will also require a warehouse-specific policy called warehouse legal liability insurance.
Common commercial insurance policies can include:
Warehouse legal liability insurance, sometimes referred to as just warehouse liability, covers a third party’s property that is under the care of the warehouse.
Warehouse legal liability is a type of inland marine insurance.
Warehouse legal liability is designed to protect against the loss or damage to inventory owned by third parties.
Most policies will only cover negligence when handling or storing property and will not cover Acts of God or force majeure events.
Situations that warehouse legal liability will typically cover include:
Warehouse legal liability does not typically cover events outside the control of the warehouse operators, such as Acts of God or force majeure events. These can include hurricanes, floods, tornadoes, earthquakes, employee dishonesty, and war or civil unrest.
While this can vary based on the contract, inventory is typically valued at a fixed value per pound of inventory. For example, if the warehouse is liable for $0.75 per pound of inventory and 10 pounds of inventory is lost, the warehouse is only responsible for $7.50 in damages.
Most contracts value inventory between $0.15 and $3.00 per pound.
When this is insufficient for high-value inventory, “landed cost” policies are also available that reflect the manufacturing, transportation, and warehousing costs. These policies will have higher premiums since they provide additional coverage.
While most policies will only cover the cost of the lost or damaged inventory, many insurance providers will offer extended coverage that can include:
General liability covers bodily and property damage claims against a business. For example, if a third party slips at the warehouse, the medical bills and any legal expenses would be covered by a general liability policy.
Warehouse legal liability on the other hand covers property owned by a third party while it is in control of the business.
Since general liability insurance also covers third-party property, it may seem redundant to purchase a warehouse legal liability policy. However, since warehouses handle third-party property as a primary business function, general liability is insufficient and a separate policy is required.
For individuals looking for greater insight into how warehouse legal liability insurance works and what underwriters consider when creating a policy, the Inland Marine Underwriters Association’s Underwriting Overview can be a great resource.
Because warehouse businesses can vary so widely depending on size, building features, and commodities handled, there is no published data on the average cost of warehouse insurance.
However, a warehouse insurance application can provide insight into the factors that will affect the cost of insurance. These factors can include:
While many companies are prone to select the cheapest monthly premium, it can end up costing companies more in the long run because the policy may come with more exclusions or a lower policy limit.
However, there are several techniques companies can use to find the best rates:
A wide range of companies operating different types of warehouses and for various activities will all still require the proper insurance coverage.
These companies, activities, and warehouse types can include: