Deterioration of stock insurance can provide essential cover for any business that sells or stores perishable goods.
In this post we will explain what deterioration of stock insurance is and what it covers, along with some common exceptions and limitations to the cover.
What is Deterioration of Stock Insurance?
If an unexpected event causes your perishable stock to spoil or degrade, then deterioration of stock insurance can cover your losses. Specifically, this cover can provide some financial compensation should deterioration make your stock unsuitable for sale.
Business insurance policies generally will not offer cover for stock deterioration as standard. To get the protection you need, you will either need to get a specialist policy, or you will need to add the cover to an existing policy.
Some insurers may specify that you introduce certain measures in order to safeguard your stock, as a condition of cover. This might include installing a failsafe, such as a backup power system, while staying on top of equipment cleaning, servicing, and maintenance schedules.
What Does Deterioration of Stock Insurance Cover?
Deterioration of stock insurance covers loss or damage of perishable goods that need to be stored at certain temperatures.
For example:
- A power failure causing a fridge or a freezer to fail.
- Water damage from leaks or flooding.
- Transport issues – for example, a truck transporting temperature-controlled goods is involved in an accident, resulting in equipment failure.
- Damage from insufficient heating, cooling, or unwanted temperature fluctuations.
Are There Any Exclusions and Limitations to Deterioration of Stock Insurance?
Most deterioration of stock insurance policies will list a number of exclusions and limitations. These might include:
- Poor Maintenance and Neglect – If a fridge, freezer, or other equipment fails as a result of poor maintenance, your insurer may reject your claim. Stay on top of servicing and cleaning schedules to ensure you get the cover you need.
- Foreseeable Events – Similarly, your insurer will likely reject your claim if your stock deteriorates as a result of an incident you could have foreseen and prevented. For instance, you might have to take special measures to protect your stock in the event of a heatwave. If you were aware that high temperatures were forecast, but you did not work to secure your stock, then you may not be covered for any loss.
- Natural Deterioration – Deterioration of stock insurance is designed to cover sudden and unexpected events. It will not cover losses due to slow or gradual decline.
- Pre-Existing Problems – If your stock was already faulty before you put it into storage, then your insurance probably will not cover you for any unexpected events leading to total loss.
- Security Issues – If your equipment fails as a result of a break in, your insurer may reject your claim if they find that you did not take adequate steps to secure your premises. Most policies also include standard exclusions for losses due to war, terrorism, riots, and civil unrest.
Who Needs Deterioration of Stock Insurance?
Any business that stores, transports, or sells perishable goods could benefit from deterioration of stock insurance. This might include:
- Cafes, restaurants, bakeries, butchers, delis, takeaway shops, and any other business that prepares and sells food on the premises.
- Greengrocers, corner shops, newsagents, off-licenses, wine merchants, and supermarkets.
- Pharmacies, along with any business that stores or sells cosmetic and beauty products.
- Florists and other horticultural businesses.
- Warehouses that specialise in storing any kind of perishable good.
Get The Cover You Need for Your Stock
James Hallam is an independent Lloyd’s broker with access to a hand-picked selection of A-rated insurance providers.
We can help you get the specialist stock deterioration insurance you need to protect your business against unexpected events. We can also advise you on essential risk management procedures that could make stock deterioration less likely, and we can show you how to evidence these measures to your insurer in order to potentially reduce the cost of cover.