Stock is the most mobile asset group: the warehouse empties out on Monday, three lorries pull in on Thursday. If the sum insured is a single fixed figure, the company either overpays needlessly or is underinsured during peak periods – precisely when the value is highest.
- The stock sum insured is typically based on purchase or production cost – not the selling price.
- Patterns for handling fluctuation: average stock, a maximum limit, temporary increases – these vary by insurer.
- Checking the stock sum insured before a seasonal peak is the least costly loss protection there is.
At what value does stock stand?
The terms typically treat stock at purchase or production cost: a trader’s goods at the purchase price, a manufacturer’s work-in-progress and finished goods at the cost incurred. Lost margin and lost profit are not material damage, so property insurance doesn't cover them – business interruption insurance is what's meant for the financial consequences of downtime, within the scope of its terms. This is an important boundary worth knowing in advance, not discovering at claim time.
Handling the fluctuation
In practice, several patterns exist, named and structured differently by insurer: stating an average stock figure (the typical level, for example an annual average), fixing a maximum value (the highest level ever reached), or a combination of the two with limits and notification rules. Some allow a temporary increase for seasonal restocking, reported separately. Which one suits a given company depends on its stock turnover – this is worth working through fully at the survey.
One thing is certain: hiding the peak value is a bad strategy – if the claim hits at the peak, the underinsurance rule strikes exactly there: the pro-rata rule.
Storage: the other half of stock cover
For stock, the terms can also set storage rules: water-sensitive goods kept above floor level, flammable material kept separate, outdoor storage only where specifically named. These aren’t red tape: warehouse discipline also reduces the claim itself. The storm and water-damage articles (storm, water damage from pipes) show why the bottom shelf and the yard are the two critical zones.
A good routine at the change of season: a glance at the policy before restocking – is the sum insured enough, is a temporary increase needed? That’s five minutes, and it heads off the worst possible surprise.
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