You Can't Own a Wholesale Business Without This
The wholesale distribution industry is growing quickly. In fact, in 2012, this industry grew faster than the overall U.S. economy, according to Tom Gale, publisher of Modern Distribution Management. The total revenues of wholesale distributors grew to $4.9 trillion in 2012, up 5.1 percent from the year before. In particular, motor vehicle and motor vehicle parts wholesale distributors as well as construction and building material wholesalers showed the most growth that year.
Wholesalers are an integral part of the U.S. economy, providing a substantial percentage of all the goods sold by retailers. Wholesalers aggregate goods from sources all over the world and make them available to retailers by a number of means. Whatever the method, few retailers could survive without having a source of products through the wholesale market. If you're entering this business or wondering if your current insurance coverage protects you from the financial risks you face, it might be time to learn a bit more about insurance coverage for wholesalers.
Statistics on U.S. Wholesalers
The Department of Commerce provides the following information on wholesale activity:
- U.S. wholesalers did almost $6.5 trillion of business in 2012
- This figure was more than one third of the entire U.S. gross domestic product for that year
- In 2007, there were almost 435,000 wholesale businesses in the U.S.
Common Insurance Exposures
There are a number of insurance products commonly needed by almost every business:
- Property insurance: Covers the contents of your place of business and the property.
- General liability: Covers the costs associated with bodily injury or property damage to other parties arising from your business activities.
- Commercial vehicle: Covers your risks from the use of owned or leased vehicles.
- Workers compensation: Covers your liability for employees who experience job-related iillness or injury, and covers their medical expenses and lost income.
- Fidelity coverage: This protects your business against employee theft.
- Umbrella liability: An umbrella policy provides excess liability coverage that increases the limits on all your primary insurance.
These products represent the core needs of most businesses, large or small. There are other areas of insurance which may be optional as well, including:
- Life and health benefits for employees
- Aircraft or watercraft insurance, as necessary
- Data protection coverage
- Business interruption insurance, in case your business is forced to shut down due to a fire or other loss
- Flood insurance if your business is at risk
- Professional liability insurance, also called errors and omissions, to cover exposures not included in your general liability policy
- Directors and officers liability, particularly if you run a public company
Your agent will recommend some combination of these types of coverage, which will form the foundation of your insurance protection. Regardless of the coverage needed, evaluating quotes from various insurance companies and designing the right wholesale insurance plan requires knowledge and skill.
Wholesale Insurance for Fluctuating Inventory
Wholesalers, manufacturers, and warehousing companies share certain business concerns. The most important of these is the protection of inventory and goods in transit.
Inventory on premises can fluctuate dramatically, particularly in a business with products with a seasonal demand. How do you ensure that you are covered for the peak periods, without having to pay an insurance premium based on the highest inventory level year-round?
The best solution to this issue is what is called a monthly reporting inventory form. You can use this form to monitor inventory levels throughout the year. Instead of paying a premium based on the highest inventory level, you report the inventory on hand and pay a premium based on your actual exposure to risk.
Wholesale Insurance for Goods in Transit
Getting the right coverage for goods in transit can become very complicated. Here are two examples:
- Goods being shipped by vessel or air can have title transfer when they are loaded aboard the vessel or aircraft, or when they are unloaded, depending on the contract between the shipper and the recipient. Without a contract, international law will determine title.
- If a ship is forced to jettison cargo, there is a formula whereby all interests in the situation, i.e., the owner of the vessel and each owner of goods in transit, share in the loss of the value of the lost goods.
Even domestic shipments present challenges and risks for your business. If you have a wholesale business, it is critical to work with a qualified agent to ensure that you address these risks with the appropriate coverage.
Additional Tips for Buying Wholesale Insurance
When you are seeking wholesale insurance, be sure to think through the various risks you face as a buisness owner as well as those for your property, your employees, inventory, equipment and other investments. By doing so, and working with an independent agent who specializes in commercial insurance, you can ensure that you do not have any insurance gaps that could compromise your financial well-being.
Here are some additional considerations for wholesalers:
- You may need to work with multiple insurance companies: If you do have extensive transit exposures, you may find that it is best to split your program. The company who can handle your routine coverages may not be the right carrier for water or air shipping shipments, especially internationally. Likewise, if you own a corporate watercraft or aircraft, you may find it best to use a specialty carrier for these coverages.
- You may need blanket coverage: If you have a large delivery fleet, ask your agent about blanket coverage. This will automatically cover all vehicles owned or leased by your company without the necessity of reporting every new vehicle purchase or sale. Such coverage is usually rated based on sales or payroll.
- You may need "surplus" insurance: If you have any unusual insurance risks – for example, if you deal in fireworks or other hazardous materials, or you need to insure international shipments – you may find that you need specialty coverage only available through a surplus insurance lines carrier. These are companies that are highly specialized in non-standard or challenging areas of insurance.
Comparing Wholesale Insurance Quotes
Managing a complicated business is challenging, especially when it comes to risk management. You may have financial exposure in many areas: real and personal property, large inventories, a fleet of trucks and goods in transit in many places and by many means.
By choosing a qualified insurance agent, you'll have the peace of mind that your liabilities and risks are being properly managed. If you're looking for more guidance, consider talking to a financial planner or accountant and also a lawyer to help you understand your liabilities and assets and how best to structure protection for them.
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