Property Insurance

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In business, “location” takes a very special place, and so does the actual building that you zero in on as your office. It should not only be aesthetic and aligned to your business requirements, but it should also offer optimal safety standards for your employees and assets. If the unit you plan to set up is a manufacturing unit, then the factory and warehouse have a very significant role to play in the proper functioning of the business. Often factories and warehouses do not have the sophisticated security measures which are often undertaken for commercial office setups. However, the equipment and the produce kept in factories/warehouses are extremely valuable. Any untoward happening in the factory or warehouse could bring the business operations to a standstill. It is quite apparent from this, that factory and warehouse insurance could be critical for business continuity.

What is factory & warehouse insurance?

This is a type of insurance that offers coverage to industrial setups that are especially in the business of manufacturing and storage of goods. So, if your business suffers a financial loss due to damage to machinery, equipment, goods, building, etc., within or around the premises, due to an unfortunate event such as fire, flood, etc.; then the insurance company would pay for the financial losses IF the business is adequately insured. 

Inclusions under the policy:

The policy covers all the losses incurred on the damage to the products, equipment, machinery, etc., that are stocked in and around the premises. It also offers coverage for any damage to the building/premises. In addition, you can extend the coverage to the produce/goods that move in/out of the premises. The comprehensive coverage under factory and warehouse insurance offers:

  • Content coverage:
    Provides coverage for all the contents stored on the premise including machinery, equipment, goods, etc.
  • Edifice coverage:
    The premise itself is covered, hence any financial loss incurred due to damage to the building will be compensated under the insurance plan. 
  • Money insurance:
    Cash insurance or money insurance indemnifies the insured against any loss of money within the premise under coverage. In this context, money includes currency notes, cheques, money orders, bullion, etc.
  • Stock coverage:
    The stocks held in the warehouse which could either be raw materials or finished products, would be compensated for. The valuation of the stock would have been at market value at the time the insurance policy was drawn.
  • Production interlude:
    In case the damage is such that there is a brief interruption in production, then there needs to be an effort to re-stabilize the business. This insurance provides coverage against such production interlude.
  • Civil liability coverage:
    Many untoward instances lead to civil liability problems and litigation issues. The costs such as lawyer fees, and compensation to a third party could be a sizeable corpus. Hence, availing of comprehensive coverage that also takes care of this aspect would be advisable. 

Scope of coverage – property:

Thus, the coverage under the factory and warehouse insurance policy are:

  • Building along with interior and electricals
  • Plant, machinery, and equipment 
  • Furniture, fixtures, accessories, other movable items
  • Raw materials, work-in-progress, and finished goods
  • Currency, billions, artworks, blueprints, drawings, etc.,

Not all policies cover everything. There are some policies that offer certain benefits, while other plans offer other benefits. You need to choose according to your requirement.

Scope of coverage – perils:

The events against which the coverage is allowed are as important as the physical items that the insurance offers coverage for. It is an aspect that most business owners often miss out on.

Thus, you need to take ample care to ensure that the events that could potentially cause damage to your business are under the purview of insurance coverage. This can help avoid claim rejections in the future. Ideally, you should ask your insurer and go through all the fine prints to confirm that every aspect of the risk, that could potentially damage your business; is mentioned in the policy document.

Typically, these types of policies offer coverage for these perils:

  • Fire, lightning, explosions, implosions
  • Strike, riots, or mob-led damage
  • Storm, flood, typhoon, cyclone, tornado, or the fury of the nature that leads to damage
  • Transport related damage
  • Pollution or contamination due to any of the perils
  • Bursting/ overflowing of water tank
  • Unforeseen damages due to an airplane crash, missile testing related, bush fire, animal rage, etc.,

Yet again, the above list is only indicative and not exhaustive, you will have to check for the specific details of the plan that you intend to avail of to ensure that the coverage aligns with your need. 

Additional read: How does a declaration policy work for a warehouse or factory?

Types of policy:

The types of factory and warehouse insurance that are available in the market at present are:

Comprehensive cover:

This policy covers all types of possible insurance coverages. It is one of the most ideal ways to de-risk your business. 

Valued cover:

When you cannot determine the market value of the materials under coverage, you need to opt for this type of insurance coverage.

Floating policy:

If you do not have a fixed location for your insurance, say for instance when your goods move from one place to another; you need to opt for a floating policy. This would ensure the continuity of your insurance coverage. Thus, it is ideal for material that moves to and fro for processing, storage, sale, etc.

Replacement and Reinstatement policy:

If there has been damage to the asset covered under the plan, this type of policy would provide the required funds to replace or reinstate the insured asset.

Specific policy:

The property value is usually lower than the actual value of the asset, this coverage is only up to a pre-determined specific amount. 

Additional read: Who can buy factory and warehouse insurance?

Some of the other perils such as pilferage, theft, etc. are usually covered under other policies. Also, there are riders/add-ons which you can avail of alongside original fire and allied risk policies. 

The resurrection of the factory or warehouse would require time, effort, and money. Usually, architects and surveyors do a consultation before opting for this plan. You can adequately cover these costs by taking appropriate riders. As a business owner, you must undertake proper measures to safeguard the premise and the contents within the premise. Whilst choosing an insurance plan you must gain appropriate knowledge about the types of plans available and the coverage. Remember to understand the inclusions and exclusions before you zero in on any plan. You could take the help of online insurance providers like SecureNow who provide a comprehensive comparison of features of all available products, it will help you choose the one that is most aligned to your requirement. There is the additional advantage of easy processing by availing service from this professional portal.