3PL Insurance: Understanding Limit Liability

3PL insurance – Close to 30% (29%) of business owners have no insurance coverage for their business at all. This can be frightening for any business owner because if something happens to your products, whether while in your warehouse or while in transit, the liability falls completely on you. Limiting of liability, regardless of the level of coverage you have is necessary.

The penalty for not having it could mean a significant loss in resources, customer loyalty, revenue, and product. The question is, why are so many businesses lacking coverage? The simple answer is that many don’t often know what they need. Some don’t know where to start.

One of the best places to start is understanding limit liability and how it affects and protects your business. Keep reading to learn what you need to know.

3PL Insurance Coverage: What Is It Exactly?

3PL insurance coverage is specifically for better and safer warehouse management. This form of insurance is a third-party logistics insurance provider. The concept is to cover businesses that arrange shipments and that manage services for freight carriers and similar operations.

Any 3PL provider for warehousing is required to have an insurance coverage option. This policy should protect their operations against the risk of losses. For 3PL services, some of the protection options will involve safeguarding legal liability for your warehouse. It will also include what is in the warehouse.

This means it will include the people that work in the warehouse and any equipment used. It will also include products you house and buildings involved in the operation.

How It Works in Practice

Third-party logistics coordinators and service providers often outsource their products and services. This will include things like inventory management, fulfilment services, and warehousing options. The fee you would pay for these services would be based on the volume of the products you would need outsourced and any other services that will complement your needs.

How it works is the same concept as other insurance policies. The concept is to protect your operations while you handle services and product fulfilment for other businesses. If something happens to the products that you are providing to a client, your 3PL coverage would cover any loss or damage associated with those products.

Essentially, it keeps you from being liable for damages and paying out of pocket. The insurance policy will often cover a large portion of damages instead of the full replacement cost being put on the business.

Taking Note of the Benefits

When a type of loss occurs, 3PL insurance coverage safe storage of your goods. It provides protection by using a limited liability insurance option which you will need to understand and agree on. This is often easy to file a claim when needed as well which makes it simple to navigate for service providers.

Additionally, warehouse legal liability insurance covers a wide range of potential incidents. Some of these incidents could involve;

  • Replacement of lost or damaged products during shipment
  • Floods or fires that results in damage to the warehouse
  • Theft of products
  • Damage due to occurrences of natural disasters (not always the case of coverage providers and isn’t often the responsibility of the coverage provider)

What is included in your policy will depend on the type of coverage you have and what the provider offers. However, the main benefit is having coverage for close to the full-valuer of your inventory and shipments.

Without this type of protection, 3PL service providers run the risk of being at fault in the case damage occurs. This can cause a damaged reputation for the business, loss of customer loyalty, and overall…loss of revenue.

How Does 3PL Insurance Limit Liability?

While there will be certain terms set into a 3PL coverage contract, the general purpose of this type of insurance is to limit a business’s liability. When damages occur, the insurance plan will cover a portion of those damages.

The ways that this happens are through the different segments of coverage. This can refer to business owners that take ownership of property that they haven’t already had ownership over. This also includes damages that happen while on the property of the operation.

At times, an insurance company may cover products already in-transit as well. Some policies are also very particular and only cover the 3PL location and building involved in the business but not the physical products themselves.

Or in many cases, it would depend on the products. It could also depend on the circumstances that cause the damage such as negligence results based on the fault of the 3PL provider.

Overall there is often a limit of liability that will specify an upper limit of liability. This represents the cut-off of what the insurance provider will pay.

Figuring out what liability coverage makes the most sense for your operations can be difficult to navigate. Working with an industry-leading provider would make this simpler for how you conduct business.

What About Protection for Valuable Products?

There is such a thing as end-to-end 3PL insurance coverage. However, all products aren’t always covered. It depends on the logistics protection provider.

There are single providers, which often means it covers certain services. This could be a policy that only covers the warehouse. This could also mean that only transportation is included or that it’s combined with warehouse protection.

The main areas of protection will include interruptions of your business, legal liability of your warehouse, and the transportation process. Warehouse legal liability is where your products are covered by damages. This is mainly associated with the storage of your products, and coverage is provided within reason.

That range of reasons will cover valuable products. This is often for those subject to improper handling or incorrect shipping situations. However, it’s not often that ‘acts of god’ are going to be covered. This could be an earthquake, inclement weather, a tsunami, or a similar incident.

Transportation coverage will also protect your goods. This means that the transport of the goods you provide is covered.

Negligence caused by the actual shipper is often covered. Any other coverage associated with this would be determined in your level of liability contract.

Protecting Your Goods With Coverage That Makes a Difference

It’s not often that businesses find customizable insurance. Working with a company that features specialists in 3PL coverage can make a difference in the prime protection of your goods and mediocre protection. Your limit liability is the level of coverage provided for your business, and this can be difficult to secure if you don’t know where to start.

Work with AP+ Storage Fulfilment to start making the best choices for the customers and clients you serve.

Picture of Carl Salmon

Carl Salmon

Carl Salmon is the Warehouse Manager at AP+, in charge of day to day operations with a focus on customer satisfaction.

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