What is property in transit coverage?
As a small business owner, purchasing commercial property insurance was probably a simple and easy decision. The confidence in knowing your business’s property is protected from fire, theft, vandalism, and other risks is worth the premium.
If you transport goods, equipment, or inventory to and from your business’s primary location, your property coverage typically ends at your office doors. This leaves you open to risk exposures if you store and retrieve products from a storage unit, haul equipment to work sites, or transport raw materials to a production facility.
To ensure your property is fully protected while in transport or at an off-site location, you’ll need a property in transit insurance policy.
What does property in transit insurance cover?
Property in transit insurance covers your business’s goods, inventory, and equipment while it’s being transported to or from your place of business.
These items are typically not covered by commercial property policies after they leave your business's premise, or commercial auto policies without a mobile equipment endorsement while they’re being transported. Personal property is also generally not covered by this type of policy.
"Goods" refer to the products or items that a business buys or sells. For a retail business, goods are the items on the shelves that customers purchase. For a manufacturer, they’re the finished products ready for sale. Inventory is also sometimes used to describe finished stock, but can also include raw materials and work-in-progress products.
Equipment includes the tools, machinery, and devices used by a business to operate or produce goods, including office furniture, computers, and industrial machinery. Equipment is essential for a business’s daily operations and isn’t for sale.
Property in transit insurance protects your property against:
- Theft
- Loss
- Damage
- Floods
- Earthquakes
- Fraud
You can insure your business property in transit with inland marine insurance. This type of property in transit coverage also covers items used or stored off site, like equipment at job sites or goods temporarily stored in warehouses.
Combining commercial property insurance with inland marine coverage is a solid risk management plan to safeguard your business property no matter where the job takes you.
What kinds of equipment and goods does an inland marine policy cover?
An inland marine policy protects many different types of equipment and goods, including:
- Property in transit: Property traveling to or from your business location, including raw materials, work-in-process products, finished products, and other property
- Property in your temporary care: Items you don’t own, such as equipment or goods that are on loan, like demo models or items borrowed for a special event
- Mobile equipment: Tools, machinery, and other equipment used at various locations
- Goods stored off site: Items temporarily stored at warehouses, distribution centers, and other locations
- Tools and equipment: Tools and machinery used by contractors and other business professionals that may be moved between job sites
- Unique or valuable property: Collectibles, fine art, and other high-value items
- Property that transfers information: Computers, tablets, external hard drives, and other electronic equipment
- Others' property in your care, custody, and control: If someone else's property is damaged while in your care, custody, or control, your liability coverage (such as general liability) won't cover the damage. Instead, you would need inland marine insurance, such as bailee coverage.
Why is property in transit insurance important for small businesses?
Property in transit insurance is essential for protecting your small business's assets while they’re being transported. It isn’t something you should overlook, even if your business is small or only transports things on occasion.
Without property in transit coverage, you will have to bear the full cost of replacing or repairing goods or equipment that are lost, stolen, or damaged. The replacement cost could be significant.
For example, if your business is handling goods for another company — like with a wholesale and distribution company — you may find yourself dealing with a lawsuit if something happens to the property in their care. The legal liability could be enough to put you out of business.
Your business’s reputation could also be damaged if it doesn’t have property in transit coverage. If your business can't quickly replace goods due to a lack of coverage, customers may experience delays or demand compensation. Disappointed customers are likely to share their bad experiences, which could damage your company's reputation and make it harder to attract new clients.
Without property in transit coverage, you will have to bear the full cost of replacing or repairing goods or equipment that are lost, stolen, or damaged.
Who needs inland marine coverage?
Some small businesses need property in transit coverage more than others. This is often the case for professions that regularly transport their business equipment and goods to and from their business location.
This includes:
- Manufacturing companies: Raw materials are transported to production facilities and then finished goods are transported to customers or retailers. Some manufacturing companies have multiple plants or warehouses and may need to transfer equipment or goods between locations.
- Wholesale and distribution businesses: Large quantities of goods are routinely transported between suppliers, warehouses, and retailers and may pass through multiple locations before reaching their financial destination.
- Trucking companies: Motor truck cargo is routinely transported to various locations. Freight forwarders, which handle the logistics of shipping goods, also need cargo insurance. They act as a shipper between businesses that need to move products and the carriers that transport them.
- Warehouses: Fulfillment centers often act as intermediaries for companies. They receive goods from suppliers, store them, and then ship them to retailers or customers as directed.
- Photography and videography businesses: Photographers and videographers use expensive equipment that’s routinely transported to various locations for photo and video shoots. Property in transit insurance provides important protection in case a camera or other photography equipment is stolen or damaged.
- Catering companies: Caterers often move food, serving equipment, and supplies to events. They need coverage in case their equipment is damaged during setup or is stolen during the event.
What are some common exclusions and limitations of property in transit coverage?
Although property in transit insurance provides valuable protection, there are some exclusions and limitations you should be aware of.
For example, wear and tear damage can be an exclusion. Coverage is not often extended to items damaged as a result of a failure to maintain property or equipment.
Consider the following example to understand the difference between wear and tear and property damage.
- Wear and tear: A business uses specialized equipment to package its products. However, the equipment hasn’t been properly maintained and doesn’t add sufficient padding, which causes some of the products to be damaged in shipping. Because the damage is the result of a failure to maintain the packing equipment, a property in transit claim will likely be denied by the insurance company because it was the result of a wear and tear issue.
- Property damage: A company properly prepares its products for shipping, but they’re damaged in transit when an inexperienced forklift operator drops a pallet. The damage in this case will be covered by a property in transit policy.
Property in transit policies typically have other exclusions, like intentional damage or items not listed in the policy.
It's also important to note that a property in transit policy is a named perils policy, which means it has coverage limits. It only covers losses specifically mentioned in the policy.
On the other hand, open perils coverage, which is found in most commercial property policies, protects against all risks or causes of loss, except those specifically excluded in the policy.
How to determine the right property coverage for your business
To determine whether your business needs property in transit insurance or not, you’ll need to consider the size of your business and the type and value of the goods you transport. You’ll also need to consider how often you transport them and the distance (e.g., regional, national, international).
For example, a small business that sells baked goods from home may not need a property in transit policy if it only transports a few cakes, cookies, and other low-value items locally and infrequently.
However, if it later expands to ship more products or higher-value items — like expensive wedding cakes — investing in property in transit insurance will provide critical protection against potential losses.
If you have employees, you also need to consider their driving records and claims histories. A driver with recent traffic violations will be more likely to be involved in an accident while transporting goods than someone with a clean driving record.
It’s also important to keep in mind your employees’ auto insurance won’t cover your business’s goods, inventory, and equipment.
Get the right insurance for your small business with Insureon
Finding the right policy for your small business's specific needs and budget is easy with Insureon. Just fill out our easy online application to receive free insurance quotes from trusted insurance providers.
Our licensed insurance agents are available to answer any questions and help you find the affordable small business insurance for your needs. Most businesses can get same-day coverage and download a certificate of insurance as proof of coverage right away.
Cyrus Vanover, Contributing Writer
Cyrus is a finance and insurance writer who is passionate about helping people and businesses succeed. He is also the author of the book "Earn a Debt-Free College Degree." He has written for some of the largest financial institutions in the country including TD Bank, Citizens Bank, and many credit unions. Cyrus has also contributed to Newsweek. Based in the Blue Ridge Mountains of Virginia, he enjoys hiking the local trails and exploring old Civil War battlefields and other historical sites in his spare time.
