What is Inventory Insurance?

Inventory Insurance provides financial coverage against loss, damage, or theft of goods stored in warehouses, stockrooms, or retail premises. It is a key component of business risk management, especially for retailers, wholesalers, e-commerce companies, and manufacturers.

• Protects raw materials, work-in-progress, and finished goods
• Covers losses due to fire, theft, flood, and other insured perils
• Ensures business continuity after stock loss

Why Businesses Need Inventory Insurance

• Minimizes financial loss from fire, flood, or burglary at storage locations
• Required for bank loans, warehouse leasing, or supply chain contracts
• Protects large volume and value of inventory under risk
• Essential for seasonal businesses with stock buildup (e.g. festivals, Diwali, New Year)

Coverage & Inclusions

Standard inventory insurance policies cover the following risks:

• Fire, lightning, and explosion
• Theft or burglary (with forcible entry)
• Riots, strikes, and malicious damage
• Water damage due to burst pipes, floods, or heavy rain
• Natural disasters: earthquake, storm, cyclone, etc.
• Impact damage (e.g., vehicle crashing into warehouse)

The sum insured is usually based on the stock value at cost or market price, whichever is applicable.

Exclusions

Inventory insurance generally does not cover:

• Normal wear and tear or spoilage due to lapse in refrigeration
• Stock obsolescence or slow-moving goods
• Willful negligence or dishonesty by owner or staff
• Loss due to war, terrorism (unless add-on taken)
• Stock kept in unauthorized or unsafe locations

Types of Inventory Insurance

• Standalone Stock Insurance: Covers stock in a particular location or godown
• Shopkeeper’s Policy: Covers inventory and contents in retail stores
• Fire & Special Perils Policy: Includes building + stock + equipment
• Marine-cum-Warehouse Policy: Combines marine transit and storage risk
• Floater Policy: Covers fluctuating inventory across multiple locations

Add-On Covers

• Terrorism Cover: Protects inventory against loss due to terror-related acts
• Deterioration of Stock: For refrigerated goods like food or pharma
• Transit + Warehouse Combined: Useful for businesses with continuous logistics
• Goods-in-Process Cover: For stock under manufacturing/assembly

Tax Benefits

• Business Expense: Premium paid is deductible under “Profits and Gains from Business or Profession (PGBP)”
• GST Input Credit: Available if insurer provides proper GST invoice
• Helps reduce net taxable income for stock-heavy businesses

Claim Process

1. Inform insurer immediately after loss or damage is discovered
2. Take photographs and protect undamaged inventory
3. File a police complaint if burglary is involved
4. Arrange surveyor visit and provide access to premises
5. Submit documents: claim form, stock register, purchase bills, valuation report
6. Insurer verifies records and settles claim as per policy terms

Important: Maintain updated stock records, invoices, and purchase details at all times.

FAQs for Warehouse Owners, MSMEs & Traders

• Can inventory insurance cover seasonal or fluctuating stock?
  Yes, floater and declaration policies are designed for such needs.
• What happens if inventory is damaged in flood?
  If flood is covered under the policy, and stock was stored at insured premises, claim is valid.
• Is insurance mandatory for inventory?
  No, but strongly advised if inventory value is high or tied to business loans.
• Can I insure raw materials and finished goods together?
  Yes. Policies can be tailored to include raw material, WIP, and finished goods.
• What documents are needed at time of claim?
  Stock register, invoices, purchase orders, surveyor report, FIR (in case of theft).