Inventory glossary
What is Inventory insurance?
Inventory insurance is a policy that covers the cost of stock lost to events like fire, theft, flood, or shipping damage.
For a small Shopify store, inventory is often the biggest asset sitting in a warehouse or back room. If a pipe bursts or a supplier shipment is stolen in transit, insurance replaces the cash tied up in that stock instead of wiping it out.
Use it by insuring your inventory at its cost value, not retail price, since that is what you actually lose if it is destroyed. Review the coverage amount each season as your stock levels and SKU count grow, so you are not underinsured during peak buying periods.
Example
A candle store holds 2,000 units at an average cost of 6 dollars each, for 12,000 dollars of inventory value. The owner buys a policy covering up to 15,000 dollars of stock to leave room for the holiday restock. When a storage unit floods and ruins 500 units, the claim covers 3,000 dollars of the loss.
Common mistakes
- Insuring at retail value instead of cost, which overstates the claim and the premium.
- Forgetting to update coverage after a big seasonal purchase, leaving new stock underinsured.
- Assuming a general business policy automatically covers inventory in transit or at a third-party warehouse.
Inventory insurance and SteadyShelf
SteadyShelf turns your Shopify sales and each supplier's lead time into an order-by date and quantity for every product, then drafts the purchase order for you to approve.
SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.
Related terms
Carrying cost · Holding cost · Inventory shrinkage · Inventory valuation · Damaged inventory
FAQ
Should I insure inventory at cost or at retail price?
Insure it at cost. That is the actual cash you lose if the stock is destroyed, and insuring at retail just increases your premium without matching your real loss.
Does inventory insurance cover stock while it is shipping from a supplier?
Only if the policy specifically includes goods in transit. A standard business property policy often covers inventory only while it sits in your own location, so check the terms with your supplier's shipping method in mind.
Let SteadyShelf do this math for every SKU
Order-by dates per supplier, seasonal forecasts and draft POs for your Shopify store. $29/month after a 30-day free trial.
Get early access