Your goods are your business, however, they need to be outsourced at times for growth. At times like these, how do you protect your asset? Insist on insurance.
3PL service providers are helping businesses scale up. Customers from around the globe and more eCommerce businesses are opting for warehouses to store and ship products. Storing goods in warehouses comes with added risks — theft, fire, flood, and more.
When goods are stolen or damaged, a business can incur huge losses. At most times, regaining losses are not possible. Such a scenario is one primary reason to choose the right 3PL partner and, more importantly, ask the right questions.
Many first-time customers often ask us about the insurance plans we offer and how we keep assets safe. Here’s what you should know.
Who assumes responsibility for your goods?
Under the United States Uniform Commercial Code (UCC), the warehouse owner assumes responsibility for the goods they store for a fee. If the goods are damaged or stolen, the warehouse owner is liable for not exercising reasonable care over the assets. Claims may arise from several reasons such as theft, fire, flood, mismanaging inventory, and lack of refrigeration, amongst others.
What insurance options are available, and what do they cover?
3PL service providers may offer various insurance policies to safeguard your products. However, here are the three most common insurance types on offer.
1. Warehouse Legal Liability Insurance
Warehouse Legal Liability Insurance means that the warehouse owner needs to exercise responsible and safe storage of your goods while they are in his possession, in the same manner, a reasonably careful man would provide. If carelessness results in damage, the Warehouse Legal Liability Insurance will cover the goods, as specified in the contract.
Any other type of damage incurred to the goods, such as fire, flood, or natural disaster, will be the customer’s responsibility.
Note: This type of insurance will only cover the goods in case of negligence resulting in damage or loss.
2. Business Interruptions Insurance
If a natural disaster or a business interruption has to occur, the Business Interruptions Insurance covers the warehouse and the 3PL service provider during the time that they were unable to conduct business.
There is also Contingent Business Interruption Insurance, which covers you when a warehouse provider was not able to operate. When a business buys this cover, one can file a claim to cover losses during the insurance period.
Note: A Business Interruptions Insurance covers the warehouse losses and not the customer storing goods.
3. Transportation Insurance
Transportation Insurance covers your goods while being transported. With this type of insurance, there are clauses and limitations as to how much one gets reimbursed. If goods are damaged during transit owing to negligence, the insurance provider will pay for the loss of goods up to a contractual limit.
When the event is outside of the 3PL service provider’s control, such as fire or a natural disaster, the customer is still responsible for the damage. When signing the contract, ensure you understand the terms and conditions properly.
Note: Depending on the circumstance, the insurance may cover loss of profits, the wholesale price of your goods, or the price per pound.