When it comes to stock, you should include your goods, including high-risk items such as alcohol and tobacco, within your shop's contents insurance.

What is ‘stock cover’?

Stock cover is counted as part of the contents insurance for your business. It provides financial protection for the loss or damage to the items your business sells.

Make sure you understand the difference between your ‘stock’ and your ‘contents’. Not only will it help you accurately calculate your stock and contents insurance levels, it will influence how your , and how your business insurance risk is perceived, the premium, and the terms that will apply.

The ‘stock’ aspect of your contents insurance provides specific protection for:

• Materials and components
• Goods in the process of manufacture
• Finished products before, during and after delivery

Can stock insurance account for seasonal uplifts in stock?

Often, shop and retail insurance cover will include an automatic seasonal adjustment for common busy periods such as Christmas and Easter. This means that during these times a significant increase of up to 25-30% in your ‘usual’ stock levels, and therefore your ‘sums insured’ amount, can be covered as standard, helping you keep your costs down at these times.

Not all trades have the same seasonal peaks at the same time, though (a school uniform retailer for example will have more stock in August/September). That’s why some stock insurance policies can offer seasonal increases depending on the needs of your business.

If your stock insurance doesn’t cover the peak times when you need increased stock cover, then you can also arrange cover on a ‘maximum amount at risk’ basis, based on the point in time your stock is at its highest.

How do I calculate my stock levels?

Firstly, it’s important to calculate the value of the stock based upon the replacement cost to you from your suppliers, not its potential value further down the sales chain. If you don’t, you could be over-insured and end up paying too much for your insurance.

Also, remember to cover yourself for the highest level of stock you may have through the life of your policy (including seasonal variations). The insurance term for this is your ‘maximum value at risk’, which means the highest value a complete loss of all your stock could cost you to replace. Insuring for a lower level of stock could leave you under-insured, and this could jeopardise your ability to claim should you need to.

It is your responsibility to tell the insurer what your stock is worth to you. A broker is not allowed legally to advise you on how much cover you need, and as the owner, no one else understands how your stock moves through your business better than you do.

What does ‘goods in transit’ insurance mean?

‘Goods in transit’ insurance is designed to cover your stock:

• During collection and delivery to your premises
• During delivery of items to your customer

Businesses need to remain flexible to meet customer needs and moving stock with a variety of methods is a prime example of this. A policy can cover you for transit in your own vehicles or by a third party means such as hauliers, couriers, and recorded and standard postage.

An important question to ask yourself when arranging goods-in-transit cover for your stock is, “Who has ownership and/or responsibility for the goods-in-transit?” For example, when ordering a consignment of goods, does your responsibility for the goods start from the time it leaves the source or from the time when its delivered to your premises?

If you import or export goods by air or sea then you’ll need to discuss marine insurance for consignments sent and received worldwide with a specialist insurance adviser.

Why are frozen goods not insured as standard?

Damage to frozen goods as a rule will not be insured under a standard business policy, as usually these policies exclude losses from a change in temperature or as a result of electrical or mechanical breakdown. Hence specialist ‘deterioration of stock’ cover, or ‘food in freezer’ cover is required. This can be applied to a variety of equipment such as freezers, refrigerators, chillers and cold rooms.

There is a similar option to protect goods which are kept out in the open, if you have a storage yard or a garden centre for example, and some of your stock is kept outside the main building.

As with all insurance policies, check your individual policy document for other possible exclusions.

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About the author

Mike Stephens is a respected senior industry professional and Fellow of the Chartered Insurance Institute (CII) with well over 40 years’ varied experience in the commercial insurance sector as a director, underwriter, and operational improvement manager.