Everything You Need to Know About Warehouse Insurance as a Renter

As an ecommerce business owner, you’re likely concerned about getting the right warehouse insurance. Yet, how do you make sure you get the right amount of coverage without paying high premiums? You want your inventory, equipment, and business to be protected. But, money doesn’t grow on trees. 

The first step to getting coverage is learning about the different options. This blog post details the different types of warehouse coverage and everything you need to know about warehouse insurance.

Why do I need warehouse insurance as a business owner?

You need warehouse insurance as a business owner to protect your inventory and business overall. While the warehouse provider’s insurance may cover incidents or items, it often isn’t comprehensive enough to protect your business if something goes wrong. 

Common Types of Warehouse Coverage

Each business and warehouse has a unique set of variables that impacts the type of insurance coverage needed. General liability insurance and commercial property and/or inventory insurance is normally a necessity for any business that uses warehouse space. 

For some businesses, it may make sense to get additional coverage beyond the ones listed below. 

Commercial Property Insurance

Commercial property insurance covers damage to your business property stored in the warehouse. When getting this type of insurance, make sure your coverage limit matches the value of peak inventory levels. Otherwise, you may not be covered for the full extent of damages. 

What’s specifically covered?

• Inventory
• Supplies
• Tools
• Shelving
• Machinery
• Most other items in your warehouse

What are common risks covered by this insurance?

• Fire
• Theft
• Vandalism
• Water damage (non-flood related)
• And more

This insurance sometimes also covers debris removal or pollution clean up.

Inventory Insurance and Warehouse Stock Insurance

This type of insurance covers the inventory and materials used to make your products kept in your warehouse. It excludes damages due to defects, wear and tear, and specific environmental conditions that may be noted in the policy. 

General Liability Insurance

General liability insurance protects your business when someone sues you due to an incident in or on the property of your warehouse. One example is if a mail person tripped on your pallets when dropping off a package. Or if you accidentally dented someone’s car while trying to move packages. 

What’s covered?

• Third-party bodily injury
• Copyright violations
• Third-party property damage
• Lawsuit fees

Essentially, liability insurance covers the cost of medical bills, repairs, and any associated legal costs. 

Business Interruption Insurance

When something bad unexpectedly happens to your business, it’s essential to have your products covered by insurance. But, what if you could also cover the cost of any lost income from the covered event?

That’s exactly what business interruption insurance covers – lost income and operating expenses after an incident renders your warehouse unusable. 

This is optional insurance that may be a good idea if you’ll need help covering your rent or if you may need to rent out a temporary space to continue operating. 

Business Owners Policy

A business owners policy includes the benefits of general liability insurance, commercial property insurance, and business interruption insurance all rolled into one policy. It’s a great option for new brands and smaller warehouse businesses that won’t need coverage for a lot of assets, property, or buildings. 

While this is a good base for new businesses, as your organization grows you will likely need to expand your insurance. 

Inland Marine Insurance or Transit Insurance

While the insurances listed above cover your business in case something happens in the warehouse, what happens if something happens outside of it?

This is where inland marine insurance or transit insurance can cover the gap. Once your products are out of your physical space, they still need to make it to their final destination safely. Transit insurance covers your products moving between suppliers, warehouses, retailers, and customers.  

What’s covered?

• Goods in transit to and from the warehouse
• Accidents during transportation
• Theft during transportation

What’s not covered?

• Natural disasters
• Damages that are not the carrier’s fault
• Damages inherent to the goods themselves

Another perk – this insurance often covers temporary storage during transit, like an overnight truck. 

Other Considerations

Congratulations – now you know everything you need to know about insurance, right?! 

Not quite. Don’t rush out and purchase coverage just yet. Here are some other things you should consider. 

Warehouse Insurance Lease Requirements

If you are renting your warehouse space, your landlord may have requirements when it comes to the minimum amount of insurance you need to have to operate in their space. Many require general liability insurance that include a specific limit. You may also have to name them as ‘additionally insured’ to protect them from being sued as well. 

What You Cover vs. What the Warehouse Covers

For any warehouse space you rent, whether it’s an entire warehouse or a cowarehousing space, make sure you check what the warehouse owner covers and what you need to cover. You may need coverage like umbrella coverage for common areas while also protecting your inventory.

Or, you could decide to get cross liability coverage. This will cover any damage or injuries caused by a business sharing the premises with you. If all renters are covered by cross liability insurance, it can help avoid expensive legal disputes when accidents happen. 

Coverage for Replacement Cost vs. Actual Cash Value

If you’re protecting your inventory you may want to consider weighing the pros and cons of covering the replacement cost vs. the actual cash value. The replacement cost pays you the money to replace any goods destroyed or damaged brand new. Actual cash value, on the other hand, will take into account depreciation and likely pay you less.

While replacement cost is usually better for ecommerce businesses, if you’re strapped for cash and are worried about your monthly payments, selecting actual cash value could lower your premium. 

Crime Insurance

If you’re investing in a space you’re concerned about, or if you want to give yourself extra protection against bad actors, crime insurance covers a wide range of incidents. Some of which include:

• Theft
• Fraud
• Employee embezzlement
• Employee dishonesty
• Forgery
• Electronic crimes

Your first warehouse may not be your dream warehouse, but you can protect it like it is. 

What insurance do I need to rent a space at Polygon?

We know insurance can feel overwhelming, so we keep things simple. To rent warehouse space with Polygon, all you need is general liability insurance. Coverage must be at least $1,000,000 per occurrence and $2,000,000 general aggregate, provided by a licensed and reputable insurer in the state where your Polygon location is based.

Once you have coverage in place, just provide us with a Certificate of Insurance (COI). That’s it—no complicated requirements or extra policies needed.

Still not sure which insurance you need?

Reach out to other brands and business owners to find out what kind of coverage they’re using, as well as who their providers are. This can help you avoid common coverage gaps that could leave your business vulnerable to tragedy. 

FAQs on Warehouse Insurance

What are the risks if I decide to forgo insurance?

If something bad happens to your products or assets, you’ll have to assume full financial responsibility for the damage. The cost can range from replacing inventory, the cost of temporary storage, business interruptions, and legal liabilities. 

All of these line items can add up quickly and could hurt your business, or put you out of business entirely. 

What documents do I need to get warehouse insurance?

Lenders ask you to provide documents so they can determine the risks involved with your business and the level of coverage you’ll need. Some of the documents they ask for include:

• Inventory list
• Proof of ownership
• Warehouse security protocols
• Fire prevention systems
• Information on warehouse’s construction 
• Warehouse’s location 

Gathering these ahead of time can help expedite the process of receiving coverage. 

How much does warehouse insurance cost for a renter?

There are a lot of variables that go into the overall cost of insurance for a renter. Some of the variables include:

• Business’ claims history
• Geographic location
• Industry
• Size of your warehouse
• Number of employees
• Type of items you store

Often, for facilities under 50,000 square feet, the cost falls somewhere between $500 to $5,000 a year.

How do I ensure I have a low warehouse insurance premium?

Everyone wants to keep their premiums low without sacrificing coverage. When it comes to reducing your warehouse insurance premiums, you can invest in one or multiple of the following: 

• Increase warehouse security
• Installing fire suppression systems
• Maintaining up to date safety records
• Conducting regular risk assessments
• Compare costs between multiple insurance agencies
• Adjust coverage based on inventory stock 

Is warehouse insurance really necessary?

Yes, warehouse insurance is really necessary and often required by the warehouse landlords that you rent from. 

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