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A Guide to Business Inventory Insurance

Updated: Dec 25, 2022

It can hurt your business when you lose or damage your inventory due to events like fire, floods, or even theft. Fortunately, there are ways to protect your business and help you recoup your losses, such as business inventory insurance.

Business inventory insurance can be a lifesaver when accidental losses happen to your business. With good inventory insurance in place, you can still gain back what was lost due to these unexpected events.

What is business inventory insurance?

inventory insurance coverage

Business inventory insurance is a special type of business insurance that covers losses and damages due to uncontrollable events. When you find your products or inventory affected by a natural phenomenon or theft, you can claim insurance to cover what was lost.

How does business inventory insurance work?

According to the Federal Emergency Management Agency (FEMA), around 40 to 60 percent of small businesses close down permanently due to natural disasters such as hurricanes, wildfires, floods, tornados, and earthquakes. Without enough funds to recoup, it can be difficult to start all over again. This is where business inventory insurance comes in.

Basically, business inventory insurance companies compensate you for any damages to your business’ inventory or stocks in the event of natural disasters, vandalism, and even theft.

While the insurance covers your current supplies, it is not just limited to the products that you sell. Your inventory also includes all the physical assets your business needs to operate such as your computers, furniture, and even other appliances.

Why do merchants need business inventory insurance?

business inventory insurance

Getting business inventory insurance may seem like an additional effort and cost for your business, but there are actually great benefits to getting one.

1. It balances risk

Just like any other insurance, business inventory insurance protects your business from any unexpected material loss. Without insurance, loss or damage to any of your supplies or inventory can be extremely costly.

Meanwhile, with business inventory insurance in place, you have the confidence that whatever happens, your business is protected.

2. It covers losses

Slight damage to one of your equipment may not be a big deal to you, but if all the stocks in your space are burned to the ground, flooded, or vandalized, it may wipe out all your funds. With inventory insurance, these losses are covered so you won’t have to file for bankruptcy.

3. It protects your time and opportunity loss

Even if you have enough savings to cover your business loss, getting back on your feet can take a lot of time and wasted opportunities. Sometimes inventory lost won’t even be replaced until many weeks later.

me business inventory insurance policies make the load lighter by also compensating for the loss of sales during turnover or business interruption.

Some business inventory insurance policies make the load lighter by also compensating for the loss of sales during turnover or business interruption.

4. It’s often required

Your business insurance policies and business investors may also require you to take business inventory insurance to protect your profits. Even if they don’t require you, it’s also a good idea to be assured that whatever happens, you can still rest knowing your business is secured.

How much is business inventory insurance?

The cost of business inventory insurance actually depends on several factors. They could include the following factors:

  • Actual inventory. This is determined by how much your inventory costs, how much inventory you have, and where it is located.

  • Coverage. You also have the say as to how much you want the insurance policy to cover, and if you want to add any additional services.

  • Your insurance claims history. Insurance companies will also have to do a background check on you. Aside from checking your business and your business value, they will also review your claim history.

Is business inventory insurance mandatory?

Not all states require business inventory insurance. However, most states do. It’s also a great idea to consider getting one. Business inventory insurance reduces the risk of financial loss.

What to look for in business inventory insurance?

insurance for ecommerce business

Before getting business inventory insurance for your business, take the time to review different policies and check if they are the right fit for you and the industry your business is in.

Here are the main things you need to look for in business inventory insurance:


Before picking out a business inventory insurance policy, review the terms and make sure the compensation covers the cost of your inventory. Take note, however, that this does not refer to your inventory’s retail value, but rather the supplier cost.


Make sure you also review the coverage of the insurance. You want insurance that covers you for any situation, whether it’s damage due to natural phenomena, handling issues, or vandalism.


Most insurance policies require you to pay an excess to claim compensation. However, you want to make sure that the excess payable is reasonable. The excess amount varies depending on your insurance company, but this will be specified in your policy. For example, to claim insurance worth $4k, you may need to provide $600 first before the insurance company gives out the remainder.

Additional extras

Ask your insurance company for any add-ons you can get with your policy. They may offer extras or additional coverage for certain situations such as business interruption, employee theft, natural disasters, etc.

How to buy inventory insurance

retail inventory insurance

Once you have decided to get business inventory insurance, go over how to buy it safely.

1. Assess your risk

Before choosing an insurance provider or inventory insurance policy, assess your risk to determine how much coverage you really need. Check your industry, your inventory, and even your location to determine what are the most likely causes for damages or loss.

You should also review the value of your inventory and calculate how much it would take to replenish it. You need to have a good estimate of how much coverage you would likely need during unforeseen circumstances.

Upon purchase of your policy, your insurance provider will require details on your business and its accompanying risk factors because they will determine if you are qualified for the policy.

2. Find a reputable insurance broker

Next, look for a trusted insurance provider or broker. You want a company that can explain to you how your policy works and what you can do to make the most out of your insurance.

You can either get your insurance policy directly from an insurance company or through a broker. If you’re not sure where to start, reach out to us at TexPro Insurance for business inventory insurance in Texas and we’ll answer any questions you may have.

3. Compare options

Don’t forget to compare your options. Policy terms are not the same for all insurance providers, so it is important to go around and compare which policies fit you best before making a decision.

Go online for customer feedback or ask people you know who bought insurance from different companies.

4. Re-assess each year

Finally, don’t close your doors to other options when you already bought insurance. Do regular evaluations every week. If your business grows, your inventory and other resources may change as well. You might even change locations.

Don’t be scared to embrace changes. Talk to your insurance provider to check if your current policy still covers your needs in case something happens. If your current policy no longer matches your needs, you can consider switching to another one that fits your business better.

Protect your business with good business inventory insurance

It is important to secure your business before anything else happens. It may seem like an additional expense, but damages and losses in business can be very expensive without it.

To make sure you don’t empty your pockets in times of trouble, business inventory insurance helps. If you’re thinking about growing and protecting your business resources, get yourself a good business inventory insurance policy.

For insurance needs in Texas, contact TexPro Financial. We can assess your business needs, discuss your options, and even provide you with a free quote. It can be intimidating to start and look around for the best insurance, so it helps to ask an expert about it.

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