Stock Throughput Policy: End-to-End Coverage for Your Product

What is a stock throughput policy (STP)?

In typical insurance programs, many manufacturers insure their buildings, machinery, equipment and warehoused inventory under a property insurance policy and also insure the shipment and transportation of their product under a marine cargo policy. With an Stock Throughput Policy (STP), the warehoused inventory is insured through the marine cargo policy instead of the property policy.

The stock throughput policy covers physical loss or damage to all stock and inventory at risk of loss. This can include raw materials, semi-processed goods, or finished products. Starting from production and throughout the supply chain, a stock throughput policy covers your goods whether in transit or at a storage warehouse.

There are a number of reasons why a stock throughput policy may be right for your risk.

Why is a Stock Throughput Policy Important?

The journey of materials along the supply chain comes with great uncertainty. Economic instability, war risks, and natural catastrophes are just some of the obstacles that companies can face while shipping and storing their goods. Companies should consider taking action to maintain as much control as they can throughout the transit process.

With a stock throughput policy, insureds are given broadened protection against these cases and are provided worldwide coverage for goods warehoused and in transit. The policy provides continuous end-to-end coverage that fills any gray area that separate policies may have as the goods are exchanged. This would also avoid conflict between carriers and will reduce the cost of having multiple policies.

Benefits of a Stock Throughput Policy

There are several potential benefits to insuring inventory through a Stock Throughput Policy. The first benefit is the reduction of the property premium when the inventory values are deducted from the property insurance program.

In addition to being a more affordable way to insure inventory, a Stock Throughput Policy may also offer the following benefits as compared to a property insurance program:

• A marine cargo deductible is often much lower than a property insurance deductible.
• There are no time limitations. Coverage continues as long as the insured has risk, regardless of whether the goods are in transit or in storage.
• A stock throughput policy may offer broader limits for catastrophic perils such as: earthquake, flood and windstorm—and at lower marine cargo rates. Additionally, claims involving catastrophic perils do not erode available limits for the property program.
• Settlement and payment of Stock Throughput Policy claims are often easier and faster than the property claims process.
• The STP will provide broader coverage and greater insurable capacity.

Is Stock Throughput Insurance Right for You?

A stock throughput policy could assist in covering a variety of different industries. It is most convenient for companies that do a great deal of distributing and shipping goods domestically or internationally. Common industries that benefit from having a stock throughput policy include auto, food and beverage, pharmaceutical, retail, and e-commerce industries.

For proper evaluation, a comparison of available coverage, deductible and costs associated with insuring stock and inventory must be made between the property insurance program and a stock throughput policy

• Are available limits, including catastrophic coverages, as comprehensive, or better, in an STP?
• Is the applicable deductible for loss to stock and inventory lower in an STP?
• Is the premium credit for extricating stock values from the property program approximately, or greater than, the additional premium to cover the stock in an STP?

If the answer is yes to any or all of these questions, a stock throughput policy may be right for you.

In today’s global economy, the demand for the comprehensive coverage that a Stock Throughput Policy offers is growing. If you would like help reviewing your insurance coverage or assessing your risks, please contact your Hylant client executive. Don’t have one? Contract your local Hylant office.

The above information does not constitute advice. Always contact your insurance broker or trusted adviser for insurance-related questions.