Godown Insurance Coverage: Features & Benefits

Godown as a storage/ holding area within factories or outside plays a prominent role for businesses of various categories. They store larger and different types of valuable goods and inventory. This makes them vulnerable to various risks such as theft, fire, natural disasters, accidents, vandalism, etc. Financial protection against such risks can be covered by taking insurance. If you are a godown owner, this blog will help you choose the optimum insurance for your enterprise. 

Important Features of Godown Insurance

As per IRDAI, godowns and warehouses can be classified as property. Therefore insurance can be provided for minimum risk coverage. However, if the godown is subjected to some different type of perils, then add-ons can also be added for coverage. 

What is Covered under Godown Insurance?

Check out below the warehouse Insurance coverages you can get under typical godown business insurance.

• Structure coverage

  The godown/ Warehouse will be either an RCC (Reinforced Concrete Construction) Building or a covered steel structure comprising columns and trusses.  It covers damages to the building caused by various perils such as fire, lightning, explosions, natural disasters (like earthquakes, floods, fire, etc.), vandalism, and other specified risks. 

• Coverage for contents

  Godown insurance/Storage Facility Insurance also extends coverage to the goods and inventory stored within the warehouse. It protects against losses or damages to the goods caused by fire, lightning, storm, floods, theft, vandalism, or other calamities. This can include raw materials, finished products, machinery, equipment, and other items stored in the warehouse. 

• Business Interruption

  Godown insurance may also include coverage for business interruption or loss of profits due to an insured event. If the godown suffers damage from a covered peril and the business operations are temporarily disrupted, this coverage can help compensate for the income loss during the downtime and any additional expenses incurred to resume operations swiftly.

• Third-Party Liability

  Accidents can occur to personnel during loading/ unloading and transferring goods within the premises. This coverage will pay for the compensation for the injury/ death of the person. 

• Handling coverage

  Some policies may offer coverage for goods during transit to and from the warehouse. This is especially useful when the godown handles fragile materials that are costly. 

• Perishables coverage

  In temperature-controlled godowns, the temperature is controlled by a centralized AC (Air - conditioning) system.  Failure of the AC system can lead to large-scale rotting of the items. Appropriate insurance can be taken to cover the financial losses.

• Pharma and Vaccines cold chain

  Some medicines and vaccines can be covered under godown insurance as they are perishables. In such cases, you can opt for appropriate coverage. It should be noted that godowns for this type of storage will be small but sophisticated. 

What is not covered by Godown Insurance? 

Listed below are some of the important exclusions under Warehouse Insurance Coverage:

• Intentional damage caused by the insured or others related to the business
• Damage due to illegal activities.
• Damages caused due to improper maintenance of either the structure or the material handling equipment
• Damage caused due to pollution
• Damages due to war or terrorism. 

Points to consider when taking  Godown Insurance

Listed below are some important points that you should keep in mind when purchasing godown insurance.

• Types of materials being stored/ handled

  If the materials are hazardous, flammable, or sensitive to specific environmental conditions, ensure that the insurance policy adequately covers these risks. 

• Location of  Godown

  The geographical location of the godown plays a crucial role in determining the risks it may be exposed to. Consider the proximity to flood-prone areas, earthquake zones, or regions susceptible to other natural calamities.

• Frequency of handling of the goods

  You also need to check how often goods are moved in and out of the godown could impact the risk exposure.

• Sum Insured

  Underestimating the value of the goods stored in the godown may lead to underinsurance, while overestimation could result in higher premiums.

• Additional coverage

  Determine if you need additional coverage beyond the standard policy.

• Claim Process

  Familiarise yourself with the claims process of the insurance provider. Understand what documentation and evidence are required in case of a claim. 

• Exclusions

  Ensure that the exclusions are acceptable and do not leave you vulnerable to potential risks.

• Deductibles

  Check the deductible amount applicable to the policy. Choosing a higher deductible may lower your premium, but it also means you'll have to pay more out of pocket in the event of a claim.

• Terms and Conditions

  Understand all policy terms and conditions, including payment terms for premiums, policy duration, cancellation terms, etc.

Conclusion

A typical Godown or warehouse has multiple activities like loading, unloading, storage, etc. These carry an inherent risk of accidents or property damage. By having inventory protection insurance in place, almost any liabilities arising from such incidents can be mitigated.  However, as discussed above, there are many factors to be taken into account before finalising an insurance plan for your godown. So, it will be better if you seek advice from a professional.

FAQs

Q. What is the difference between a godown and a Warehouse?

A. Even though used interchangeably, in essence, they are different. Godown refers to a covered area used only for storage. Whereas a warehouse could have other additional activities like sorting, packing, etc.

Q. What are the items covered under a godown insurance policy with a minimum premium?

A. All the goods damaged due to fire and natural calamities are covered under Godown Insurance. 

Q. Is Godown Insurance a type of SME insurance?

A. Yes, Godown Insurance is a type of SME insurance.