Merchandise insurance: Reducing the risks


Do you keep important merchandise in storage as part of your business operations? If so, be sure to protect your inventory from risks like water damage, fire, theft or temperature variations.

Your commercial insurance will cover most damage. However, prevention is always the better option and here’s some helpful advice!

1. Reducing the risks of water damage

  • Install check or backwater valves because they are designed to prevent water backflow, which will protect merchandise that is stored in the basement.
  • Regularly check your building’s roof, foundation, walls and sprinkler system.

2. Protecting merchandise from water

  • Strategically install water leak detectors in areas where water could damage merchandise.
  • When storing merchandise in the basement, try to elevate it so that it doesn’t sit directly on the floor.

Seasonal Businesses

A diner operates full throttle all summer long—fries, hamburgers, hot dogs, ice cream— but what happens in winter?

Make sure the picnic tables, administrative material and other equipment are well protected. Before shutting down any seasonal business, close the water intake valves, empty the water from the pipes and heat the place at a minimum to avoid unexpected problems.

3. Fire hazards

Being proactive pays off! Eliminate the risk of fire in your warehouse:

  • Make sure the electric system is and remains in good condition.
  • Ban all smoking paraphernalia from the building.
  • Keep your merchandise away from all heat sources: standalone space heaters, light bulbs and welding torches.
  • Do not keep any explosive, hazardous or flammable material (like propane) in your warehouse.

4. Fire detection

Try as you might to eliminate all potential sources of fire, you’re not immune to damage... so be prepared!

  • Your team members must know your fire prevention plan. Give training and raise overall awareness about the risks of improperly handling merchandise.
  • Purchase prevention equipment like:
    • Smoke detectors (enough to cover the entire warehouse)
    • Fire extinguishers
    • Sprinklers (based on where (position, shelves, etc.) and what kind of merchandise is stored)
    • A commercial-grade fire alarm system


5. Place merchandise under the sprinklers

If you stack your merchandise, make sure your shelves provide enough clearance. This will let the water reach the merchandise on the lower ones.

Real-Life Scenario

Luke and Sandra own a hardware store. Last Thursday, a fire broke out in the warehouse. Thankfully, they had taken precautions. Two months earlier, the couple had the following prevention equipment installed by qualified professionals: fire alarm, smoke detectors, sprinklers and extinguishers on each floor. On the day the fire started, they were able to limit losses thanks to this equipment.

Within minutes, firemen arrived on site to put out the flames!

6. Theft protection

  • Install a monitored alarm system.
  • Install surveillance cameras.
  • Keep high-value merchandise in a secure space.
  • Conduct random inventory checks.
  • Limit the amount of high-value merchandise in your warehouse and be discrete about what you have in stock.

7. Internal theft prevention

When we think of theft, we usually picture shoplifters or armed robbers, but sometimes employees are the culprits. Your warehouse is at risk!

According to the Retail Council of Canada  (This hyperlink will open in a new tab)., employees will steal an average of $2,500 in cash or goods before getting caught—usually the result of many small thefts over a long period of time.

To reduce the risks of theft:

  • Ask for references and check criminal records before hiring a new employee.
  • Add sanctions to your HR Policy for employees who steal (e.g. termination)

8. Keep perishable and temperature sensitive goods in the right place 

Take preventive measures to conserve goods in the event of a power failure or HVAC system failure.

  • Make sure your commercial insurance policy includes temperature sensitive goods (if not, consider adding this clause).
  • Prepare an emergency plan in the event of an extended blackout with suppliers or neighbouring businesses.
  • Buy a generator to make sure the temperature stays constant in your warehouse.
  • Install sensors in refrigerated or climate-controlled areas to detect temperature variations. 
  • Remind employees about the importance of preserving goods to prevent spoilage (e.g. frozen food or medication).
  • Temperature sensitive goods, like plants in a flower shop, must be protected to prevent them from freezing.

Commercial insurance

When it comes to stored merchandise, combining precautionary measures with commercial insurance is the best way to protect it.

Note: This article is intended for information purposes only and should not be construed as professional advice.