Understanding Warehouse & Storage Insurance Coverage

The recent deluge in the UAE left its mark, reminding us of the immense power of nature. Not surprising, since the country is witnessing such a flood in 75 years. Now that we have seen the strength of water (Ahem!), it's time to bear the brunt of the aftermath. While the nation recovers from the effects of waterlogging, businesses are assessing the damage and losses incurred.?

Losses could be worth thousands of dirhams if the goods stored in warehouses get damaged. In such cases, insurance emerges as a vital lifeline.?

But do insurance policies cover rain damage and business interruptions??

While warehouse insurance offers a semblance of security, understanding its nuances is paramount to maximizing its benefits.?

Let's look at the different kinds of insurance available for warehouses.

Unpacking the Warehouse Insurance Umbrella

Different types of insurance policies are available for warehouses. The policies can be broadly classified into two categories: Property All-Risk (PAR policy) and Cargo Insurance policy, which covers the commodities stored in the warehouse.

The PAR policy covers claims related to theft and natural disasters. The Cargo Insurance policy covers goods stored in the warehouse.

There is also a business interruption (BI) policy to cover losses due to business interruption.

However, it is essential to note that despite the term "all risks," exclusions exist within the policy.

Property All Risk Insurance (PAR Policy)

Property All-Risk insurance, also known as Commercial Property insurance, is an integral part of any warehouse insurance policy. The warehouse owner or landlord can purchase this insurance and is eligible to claim related damages.

A breakdown of Property All Risk insurance:

Coverage: PAR typically protects against damage caused by fire, theft, and, most importantly, damage due to unforeseen natural calamities like heavy rains or floods.?

Some policies may even cover accidental breakage, repair, or replacement costs for damaged property.

Exclusions: These policies will often have sub-limits for the various benefits and other conditions that must be met to make the claim. For example, the insurance might not cover damages due to wear and tear, intentional damage by the owner, or losses due to war or terrorism.

There may also be a minimum amount for the policy to be eligible. Another aspect to consider is the deductible amount in the claim, especially when the loss is slight.?

It is a good idea to contact your insurance provider right at the onset to understand the process and follow it correctly to ensure your claim is accepted.

Cargo Insurance

Cargo insurance is a claim that safeguards stored goods against loss or damage.?

The insurance can typically be purchased by the owner of the goods, not the warehouse owner or landlord. In other words, the responsibility to insure the inventory lies with the businesses storing their products in the warehouse.

A breakdown of Cargo insurance:

Coverage: Unlike property all-risk insurance, cargo insurance pertains specifically to the commodities within the warehouse. Tenants are financially protected in unforeseen events, and warehouses benefit from reduced risk and potentially improved tenant relations.

Exclusions: Exclusions are similar to the PAR policy. In essence, warehouse policies often include several clauses and sub-limits for various benefits.?

It is always a good practice to thoroughly review the policy details and the value of the coverage offered.?

Business Interruption Insurance (BI Policy)

Business interruption insurance could safeguard your warehouse against lost income if it is forced to close due to damage from an insured peril. Insured perils vary but could include theft, fire, vandalism, and windstorms, among other losses.

Exclusions, however, may apply, highlighting the importance of discerning what is covered and what is not.

For instance, if the business was up and running within 24 to 48 hours, it probably would not be eligible for BI coverage under the policy.

How Do Insurance Companies Value Warehouse Inventory Losses??

Insurers consider several factors when setting warehouse insurance premiums. Many companies calculate premiums based on details like the size and location of the warehouse or the number of employees. The cost of replacing equipment and machinery is also considered in insurance assessments.

Some key influencers for insurance costs include:?

• Warehouse Location and Size
• Claims History
• Policy Coverage, Limits, and Deductibles
• Number of Employees
• Warehouse Services Offered
• Warehouse Revenue?
• Goods Stored

Key Considerations for Assuring Maximum Insurance Benefits:

1. Choose the right Insurance provider: Talk to multiple insurance providers to understand the different policies available. Compare quotes and assess your benefits before finalizing on a particular insurance provider,?
2. Know your policy: Ensure that you understand the policy correctly, including coverage limits and exclusions. Your policy should be able to cover a significant part of the value of your goods.
3. How to place the claims: The process of raising the claim should be simple and straightforward. You do not need additional complications when your business is already disrupted.
4. Additional coverage: You may want to explore other coverage options that can provide additional benefits and can be added to your insurance policy.

The ramifications of UAE's unprecedented rainfall reverberate across businesses. As some warehouses grapple with water damage and operational disruptions, the importance of insurance becomes glaringly evident. While warehouse insurance offers a safety net, understanding the specifics of warehouse insurance, including its limitations, is necessary to maximize the coverage benefits.