Inventory insurance can be confusing. There are a lot of terms and conditions you won’t hear in everyday conversation, meaning it can sometimes feel like you’re reading a different language. With our Inventory Insurance 101, you will be able understand the terminology, so you feel confident about your choice of insurance and how to go about filing a claim.

Here’s a brief introduction to what you need to know about inventory insurance.

Inventory Insurance 101: What Inventory Insurance Protects

Inventory insurance is designed to protect your business from the specific risks you face as an inventory dealer. At any time, an accident, theft or natural disaster could damage your inventory and lead to a business loss that affects your bottom line.

Inventory insurance coverage is there to protect your business in the case your inventory is lost or damaged due to fire, flood, hail, theft, collision, earthquake, or wind.

Inventory Insurance 101: Terminology to Know

To help understand your insurance options, policy coverage and claims process, it’s a must to understand some key insurance lingo.

Insurance Coverage

Your coverage is the amount of risk or liability your insurance company agrees to be legally responsible for paying in the event of a qualifying insurance claim for a loss that you suffer.

Named Insureds

This will be you, the policyholder, and/or your business entities you wish to cover under the insurance policy. When applying for coverage, make sure all necessary parties are named as insureds on the policy. Coverage will exclude those entities not named on the policy.


The first page of an insurance policy is known as the policy declarations. It specifies the named insureds, policy period, location of premises, liability limits and other key information. Make sure this information is correct and keep the document for your records as proof of your insurance.

Covered Loss

A covered loss is a financial loss for which your insurance company will pay insurance benefits according to the terms of your insurance policy. Covered losses are specifically defined in your policy documents.


A peril is an event that may damage covered property, including your inventory or other covered business property. Some perils are named perils, such as the fire, flood, hail, theft, collision, earthquake, and wind perils noted in your inventory policy. Your policy may also list excluded perils, which are perils that will not be covered by your insurance.

Endorsements and Exclusions

An endorsement adds specific coverage to an existing insurance policy. An exclusion is a condition or event for which the policy does not provide coverage. Often endorsements and exclusions appear together, since it is easier for insurers to exclude certain broad coverages and then add back in more specific coverage with endorsements.

Policy Limit

Your insurance policy limit is the maximum amount the insurer will pay for a covered loss. With some policies, you can choose your own limit, with higher limits resulting in a more expensive policy. Some insurers offer shared limits that are shared between a group of insureds. At Lockton Affinity, we offer individual limits, so you always have access to your full policy limits.

Insurance Deductible

An insurance deductible is the amount of money you agree to pay out of pocket for a covered loss in the event of a claim, with your insurance covering the rest up to your policy limit. Your deductible will apply each time you file a claim.

Insurance Premium

The insurance premium is the amount you pay for insurance coverage. With inventory insurance from Lockton Affinity, your premium is automatically added to your monthly billing statement from 21st Mortgage Corporation, so you don’t need to worry about paying another bill.

Insurance Claim

An insurance claim is a formal request for coverage of or compensation for a covered loss. When you file a claim, the insurance company will review your request and approve or deny the claim. Understanding your coverage and following the correct process for filing a claim helps ensure that your claim for a covered loss will be approved.

When You Receive Your Inventory Insurance Policy

When you receive your policy documents, read through them. You will find important information about how to file a claim. Also make sure that all your information is correct, especially named insureds, policy coverage, limits, endorsements and exclusions. If you find a mistake in your documents, contact your insurance representative right away. Errors discovered early can usually be corrected, limiting your exposure to excess risk.

If you have other questions about your Lockton Affinity policy, be sure to contact us. We’re happy to help.