Nuances of Insuring Goods and Inventory by Retail Chains
June 01, 2016
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Overall portfolio of clients’ risks insured in 2016
Elena Dziuba Account Manager, Property Department
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Goods and inventory are the key assets of retail chains if not the only ones they build their business upon. Loosing them can be equal to going bankrupt. It’s no wonder that a great number of leading retailers in Ukraine have long ago discovered insurance as the effective means of transferring their risks and using insurance policies as the safety bag on the regular basis. Such responsible attitude towards business serves as an example for other companies in this sphere.
Constantly dealing with working out the optimal insurance coverage for goods and inventory kept in the stores and warehouses makes me want to single out a couple of critical points which should be paid special attention to in order to receive the guaranteed indemnity without delay in case of an insured event.
While all of these nuances seem obvious, they are the very ones where mistake can slip your eye most easily. For example, range of commodities listed in the insurance policy can lack some categories of goods, or the address may be written incorrectly or be missing altogether.First and foremost, make sure to double check the following: the specification of the insured property, optimal sum insured, deductible amount and correct addresses of the insured premises. While all of these nuances seem obvious, they are the very ones where mistake can slip your eye most easily. For example, range of commodities listed in the insurance policy can lack some categories of goods, or the address may be written incorrectly or be missing altogether.
The approach to defining the sum insured and deductible amount deserve special attention here. Normally the sum insured under the policy equals the annual average value of the goods and inventory kept in each particular location adjusted for 10-20 % fluctuations during the term of agreement. Such fluctuations should be stipulated by the specific provision in the insurance policy. Usually retail chains multiply their inventory before big holidays. In order to avoid underinsurance, make sure to sign the addendum to your policy to cover the difference during high season months. It’s worth mentioning that the most scrupulous Clients are even willing to sign addendums with the current sums insured for all locations on the monthly basis. Although that is the safest way to do it, such cases are very rare due to the whole procedure being complex and extremely time-consuming.
As to the deductible amount, it is important that it be reasonable and not exceed the value of goods and inventory in each particular store. Ideally deductible is set in the fixed amount or in relative terms with regard to the sum insured in each location covered by the policy.
If we are talking about pledged inventory, another important aspect comes to light. Some pledge agreements include the detailed list of all the goods which under no circumstances should serve as the addendum to the insurance agreement. The Commodities nomenclature will inevitably undergo some changes even before the insurance agreement is signed let alone in far longer run. In these cases the insurance policy concluded for the correct amount of sum insured and containing necessary loan and pledge contracts’ details will suffice.
Another kind of danger lies in the incorrect set of named perils insured under the agreement or significant clauses of the insurance agreement left unedited. For example, insured risk of automatic sprinkler fire-extinguishing system false switching will be of no use if the insurance policy covers white goods located in the premises with automatic dry-chemical extinguishing system. Some insures prefer to impose certain limitations regarding the minimal distance from the floor in which the insured goods are to be kept. It’s worth looking closely at the agreement not to overlook these provisions. Policies intended to cover commodities requiring certain temperature conditions need to be negotiated with even more scrutiny in order to secure the guaranteed indemnity in case of an insured event.
Finally, it’s worth mentioning the fundamental truth – the process of receiving the indemnity starts at the moment of concluding insurance policy. The more information you provide your insurance partner with, the more reliable coverage you will get in the end.
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