If your business is involved in importing, exporting, assembling, manufacturing, or distributing goods, you may want to consider an insurance policy that will protect your goods from creation to the moment they enter a customers’ hands. A Stock Throughput Policy (STP) does exactly that, covering all types of cargo transportation, facilities storage, and goods, helping to decrease risks and provide coverage continuously for your products’ journey.

What is a Stock Throughput Policy?

A Stock Throughput Policy is a form of marine coverage that insures a company’s goods throughout the supply chain, from production to final destination. From raw materials to works-in-progress to finished goods, a Stock Throughput Policy provides comprehensive protection for your products in the event of damage or catastrophe.

For many companies, the process of delivering a product to a customer means that product can take on several different forms during its lifecycle and change hands a number of times. The raw materials could be imported from a foreign country, the product could be fabricated and assembled domestically, and the finished product could be stored in a different location altogether before reaching the end customer. All along this supply chain, your product is subject to a wide range of risks, meaning your company is exposed to potential financial losses.

Example:

• You run a monthly subscription box company that creates educational projects and crafts for children. Each box you create is designed and assembled in California, but the raw materials you use are imported from Taiwan. Once the boxes are assembled, they are transported to your main distribution center in Nevada, prior to shipping out to your subscribers. Last month, a shipment of raw materials from Taiwan was damaged as the shipping container was unloaded from the cargo ship. And just last week, a pallet of finished product was damaged as it was being transported to your distribution center. The damage in both instances would be covered by your Stock Throughput Policy.

What does a Stock Throughput Policy cover?

A Stock Throughput Policy covers your goods and materials from production to final destination, typically protecting against damage or loss to your inventory. Stock Throughput Policies provide “all risk” coverage, which means that all risks are covered unless explicitly excluded within the terms of the insurance contract. Stock Throughput Policies can include manufactured products as well as raw materials, semi-processed goods, and products being returned for repair.

While the specifics of coverage may vary by insurer, generally, a Stock Throughput Policy provides continuous coverage for your goods so long as you have ownership of or responsibility for the product, even if the product is in the hands of a third party. For most companies, this means that coverage starts once raw materials are acquired, continues through production, assembly, transit, and storage of the product, and ends once the product reaches the end customer.

Different from an inland marine policy, ocean marine policy, or property policy, Stock Throughput Policies cover your goods over any mode of transportation, domestically or internationally. This is particularly important for those companies involved in global trade as well as domestic shipping.

Example:

• You own a winery that distributes wine around the world. The grapes are harvested from your vineyards in Sonoma, California, and the wine is processed and fermented in oak barrels on your facility. This process may take up to nine months before the wine is ready to be packaged and shipped to customers across the nation and the globe. Your Stock Throughput Policy covers your wine during this entire process, from grape harvest to customer delivery.

Do I need a Stock Throughput Policy?

Any business that is heavily involved in importing, exporting, or transporting goods should consider a Stock Throughput Policy. Stock Throughput Policies are especially beneficial to the food and beverage, retail/wholesale, and raw goods industries. In these industries, many products are sensitive, fragile, and are of high value, which means any mishap could potentially result in the total loss of your goods.

Traditionally, many companies involved in import/export purchased inland marine and property insurance to cover their goods while stored and in transit domestically and then relied on their freight forwarders’ insurance policies to cover goods once in their possession, particularly in instances where materials or products are being shipped overseas.

However, this often presented a gap in coverage when goods are changing hands, like when items are being loaded onto a shipping vessel. Whose insurance policy would cover damage that occurred during that change of hands? If your business depends on coverage from your shipping vendors, a Stock Throughput Policy may be a better option that would ensure continuous coverage of your products.

Example:

• Your family-run farming business grows almonds, with much of the product being exported to China. While you have coverage for your perishable goods through your commercial property policy while the almonds are stored in your warehouse, and you have coverage through your inland marine insurance while the almonds are transported to the local shipping port, you’ve always relied on your shipping company’s insurance to adequately protect your almonds while they are shipped to China. Recently, a forklift carrying a few pallets of almonds from your delivery truck to the shipping container at the port was in an accident, and the almonds were lost. While you expect the shipping company’s insurance to cover the losses, they expect the same from your insurance company. This conflict could be avoided with a Stock Throughput Policy.

Benefits of a Stock Throughput Policy

There are many benefits to securing a Stock Throughput Policy, including:

• Continuous coverage: Rather than dealing with multiple policies or multiple carriers that cover different parts of your supply chain, one Stock Throughput Policy can provide end-to-end coverage for your goods. With continuous and comprehensive coverage, Stock Throughput Policies go beyond property and cargo coverage and avoid any gaps or duplication in coverage between policies.
• Streamlined administration: Administration costs and simplification are a substantial benefit to this policy. You can track your costs better, since they won’t be hidden or confused under coverage that’s shared with other properties, such as buildings. Should a loss occur, having a single policy greatly decreases the time it would take to recover. It’s a seamless process and a reduction in administrative workload.
• Broader coverage for perils: While catastrophic events like earthquakes and floods are generally excluded from property policies, Stock Throughput Policies typically cover these types of perils.
• No time limitations: Coverage on goods in transit and in storage remains continuous for as long as your goods are at risk. There is generally no time limit to how long coverage is provided.
• Global coverage: With coverage from warehouse to warehouse, inland and global, a Stock Throughput Policy provides coverage all along the international supply chain. With Stock Throughput Policies, there is no need to purchase insurance locally when doing business or shipping internationally. Coverage is worldwide, and goods and property that are in the custody of a third party are also covered.
• Lower deductibles: By falling under the marine cargo markets, Stock Throughput Policies can offer lower deductibles for catastrophic and non-catastrophic risks. Many times, a fixed deductible can apply instead of a percentage.
• Lower premiums: The marine insurance market often provides substantially lower rates than traditional property insurance markets, which can be volatile.
• High liability limits: Limits can surpass $100 million per location.
• Selling price valuation: Goods are insured at the selling price, rather than cost, which ensures that you won’t lose out on any potential profit.

What are the key exclusions of a Stock Throughput Policy?

While insurers may differ in the terms of their Stock Throughput Policies, some common exclusions can include:

• Willful misconduct
• Losses from intentional acts
• Wear and tear
• Unseaworthiness or unfitness of shipping vessel or transport vehicle
• Inventory shortages if there is no physical evidence to show what happened to the property
• Nuclear reaction or war
• Strikes, riots, and civil commotions
• Acts of terrorism

Final Word

In the current global marketplace, most industries now have international inventory and transit exposures. Stock Throughput Policies are increasing as businesses grow and the global economy expands, creating a safeguard for goods from the raw material and production stage all the way to their final destination, whether that’s in storage or in the hands of the customer. With a customized process and competitive terms and conditions, your property can be valued at selling price, replacement cost, or replacement cost plus. However you customize your plan, your goods are fully covered on their journey. Be sure to partner with a brokerage that understands your business in order to simplify the process.