Does General Liability Insurance protect my inventory and stock?

April 15, 2024

Operating a business involves numerous responsibilities, with safeguarding assets being of top priority. Inventory plays a pivotal role for many enterprises and any damage or loss can have serious ramifications on profitability. Business insurance plays an essential part in safeguarding these vital resources - though its various forms can sometimes prove daunting! In this blog post we address an often-asked question regarding inventory coverage: Does General Liability Insurance protect my inventory and stock?

Understanding General Liability Insurance

General liability (GL) coverage should form an essential element of every company's portfolio of business insurance plans, protecting you against third-party claims for bodily injury and property damage caused by your operations. For instance, if an accident happens—such as someone falling and hitting their head inside one of your stores or when your product malfunctions, causing damages at client homes—having general liability would help cover legal fees as well as settlement payments if these occur.

However, it's essential to recognize a key distinction: general liability coverage covers only third-party claims while not protecting damage done to your own property.

General Liability Policies Do Not Cover Inventory Loss

Even if a fire destroyed all or most of your inventory, general liability coverage would not cover its replacement cost; theft also falls outside its coverage parameters.

Safeguard Your Inventory with Business Property Insurance

In order to safeguard against physical damage or loss of inventory, business property insurance coverage comes in many different forms tailored to each unique need of your inventory management process. Here are a few popular policies:

  • Commercial Property Insurance: This policy ensures your physical business and contents.
  • Inland Marine Insurance: High-end protection for the products in transit between locations ensures that your merchandise reaches your customers directly or can be shipped within the offices depending on your preferences.
  • Bailee's Coverage: Custom designed to cover businesses storing customer property (e.g. dry cleaners or repair shops), Bailee's coverage provides safeguards against loss or damage of items held under your care while they're under storage.

Understanding Coverage Specifics

It is imperative that every business property insurance policy comes with its own set of risks and exclusions, making a full assessment necessary to identify any possible vulnerabilities in protecting inventory. When working with an insurer review their documents to assess coverage levels and assess any vulnerabilities.

Risk Management: Going Beyond Insurance

Consider adopting some or all of the following strategies as ways of mitigating risk:

  • Security Measures: Strengthen the security system to prevent by installing alarms, surveillance cameras, and secure locking mechanisms like alarms. Moreover, oversee the inventory areas by limiting access and perform frequent inventory audits to locate any deviations that could compromise the system.
  • Loss Prevention: Minimize fire or extreme weather damage by installing and maintaining proper electrical installations, and fire suppression equipment, and addressing potential storage facility hazards.
  • Supplier Relationships: Form strong partnerships with reliable vendors. Work out clear terms regarding damaged or lost goods during transit to minimize financial exposure.
  • Inventory Control: Apply appropriate inventory controls regularly by tracking stock levels, using a FIFO system for perishable goods, and avoiding overstocking, which would lead to higher risks of obsolescence and spoilage.

SummitCover offers experienced insurance brokers to assist with designing an appropriate business property insurance policy that protects all your inventory. By working with reliable insurers like Summit Insurance Kelowna, our agents ensure competitive quotes and comprehensive coverage tailored specifically for you.

Additional Considerations

Although general liability coverage won't directly protect your inventory, it remains essential in protecting the business as a whole. If a customer alleges any harm from using one of your products (product liability claims), general liability would help cover associated legal expenses and costs.

Landlord Insurance and Inventory 

Commercial tenants renting office spaces need to understand that their landlord's policy doesn't extend to covering inventory; as a result, business property insurance coverage must be obtained. Some landlords may impose minimum liability requirements but this won't protect all of your company assets - browse available landlord insurance solutions on our website today for further insight!

Gain Peace of Mind Through Adequate Coverage

By understanding the limitations of general liability insurance and finding suitable business property coverage options, SummitCover stands ready to guide you through the complexity of business insurance—helping you secure policies tailored specifically for you! Contact us now for a complimentary consultation session where we'll assess all of your needs!

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