Stock, Work-in-Progress & Finished Goods – What’s Covered?

Introduction

If you make, store, or sell physical products, your “stuff” is often one of your biggest assets. But it’s also one of the easiest areas to misunderstand on an insurance policy.

In UK commercial insurance, stock, work-in-progress (WIP) and finished goods are usually insured under a property section (often within a Commercial Combined policy). The cover can look simple on the schedule, but the detail matters: where the items are, who owns them, what stage they’re at, and how values change through the year.

This guide explains what insurers typically mean by stock, WIP and finished goods, what’s usually covered, what’s often excluded, and what information you’ll need to get the cover right.

Quick definitions (in plain English)

• Stock (raw materials and bought-in goods): Items you hold to use in production or to sell on. Examples: components, packaging, ingredients, spare parts, retail stock.
• Work-in-progress (WIP): Goods that are part-way through manufacture, assembly, repair, or processing. Value usually increases as labour and materials are added.
• Finished goods: Completed products ready for sale or dispatch, including items awaiting packaging, labelling, or shipment.

Insurers may use slightly different wording, but the key idea is the same: these are tangible goods that can be damaged, destroyed, or stolen.

Where these covers sit in a policy

Most UK businesses insure these items under one of the following:

• Commercial Combined (property + liability + business interruption, etc.)
• Shop/Office/Tradesman packages (simplified versions)
• Manufacturing/engineering policies (often with broader extensions)

The schedule may show a single line like “Stock/WIP/Finished Goods: £250,000” or it may split them into separate sums insured. Either approach can work, but it affects how claims are settled.

What’s typically covered (core perils)

Cover depends on the policy wording (and whether it’s “named perils” or “all risks”), but common insured events include:

Fire and smoke

• Fire damage to stored stock
• Smoke contamination (important for food, textiles, electronics)
• Fire brigade water damage following a fire

Escape of water

• Burst pipes, leaking tanks, sprinkler leaks
• Water damage to packaging and labels (often overlooked)

Storm and flood

• Storm damage to buildings leading to stock damage
• Flooding of ground-floor storage areas

Theft (sometimes with conditions)

• Theft following forcible and violent entry
• Theft from locked premises outside business hours

Impact and accidental damage

• Vehicle impact to a warehouse wall
• Accidental damage (if included) such as a forklift incident

Malicious damage

• Vandalism or deliberate damage by third parties

Subsidence (if included)

• Less common, but can be relevant for older buildings or certain ground conditions

Important: If your policy is named perils, anything not listed may not be covered. If it’s all risks, cover is broader but still subject to exclusions and conditions.

“All risks” vs “named perils”: why it matters

• Named perils: You’re covered for specific events (fire, flood, theft, etc.). If the cause isn’t listed, the claim may be declined.
• All risks: You’re covered for sudden and unforeseen physical loss or damage, unless excluded.

For manufacturers, “all risks” wording can be valuable because losses don’t always fit neatly into a named-peril box (for example, accidental damage during internal movement).

Stock: what insurers usually mean (and common grey areas)

Stock is often split into:

• Raw materials (inputs used to make products)
• Bought-in goods (items purchased for resale)
• Packaging and labelling (sometimes included, sometimes needs clarity)

Typical stock claim examples

• A fire destroys cartons, labels and components in your stores.
• A leak damages boxed retail goods.
• A break-in results in theft of high-value items.

Grey areas to clarify

• Stock in the open (yards, external cages, containers)
• High-theft items (electronics, tools, copper, alcohol)
• Temperature-sensitive stock (needs a deterioration extension)
• Stock held in third-party locations (needs “elsewhere” or “customers/suppliers premises” cover)

Work-in-progress (WIP): what’s covered and why it’s tricky

WIP is often the hardest to insure properly because:

• Value changes daily (materials + labour + overheads)
• Items may be in multiple locations (production floor, drying room, test lab)
• Some items are bespoke and hard to value

What WIP cover is intended to protect

• Materials already used in the item
• Labour and processing costs added
• Sometimes a portion of overheads (depending on your valuation basis)

Typical WIP claim examples

• A fire in the production area destroys partially assembled units.
• Water damage ruins items mid-process (for example, coated parts awaiting curing).
• Accidental damage during internal movement (if covered).

Key question: what valuation basis applies?

Policies may settle WIP at:

• Cost price (materials + labour to date)
• Selling price less unearned profit
• Contract price (for bespoke work)

If you’re a manufacturer, ask your broker to confirm how WIP is valued and whether your sum insured reflects peak levels.

Finished goods: what’s covered (and what can catch you out)

Finished goods are typically valued at:

• Cost price (what it cost to make) or
• Selling price (often needs specific wording and is less common)

Typical finished goods claim examples

• A warehouse fire destroys completed products ready for dispatch.
• Theft of boxed goods from a secure loading bay.
• Flood damages finished stock stored at floor level.

Common pitfalls

• Seasonal peaks (Christmas, summer, project deliveries)
• Goods awaiting dispatch in a “despatch area” that isn’t as secure as the main warehouse
• Goods in transit (needs a separate goods-in-transit policy or extension)

What’s often excluded (or restricted)

Even with broad cover, insurers commonly restrict certain causes of loss.

Wear and tear, gradual deterioration

Insurance is for sudden events, not slow damage.

Defective workmanship or faulty design

If a product is made incorrectly, the cost to remake it is usually not covered under property insurance. However, resulting damage (for example, a fire caused by a fault) may be covered depending on wording.

Mechanical or electrical breakdown

Breakdown of machinery is usually separate (engineering insurance). If breakdown leads to stock spoilage, you may need a specific extension.

Unexplained disappearance

Stock “shrinkage” without evidence of theft or damage is often excluded.

Theft without forcible entry

Many policies require signs of forced entry outside business hours.

Cyber events

A cyber incident that causes operational disruption is usually handled under cyber insurance, not property.

Pollution and contamination

Some contamination is covered (for example smoke), but many forms of contamination, pollution, or “taint” can be excluded unless specifically insured.

Temperature change / refrigeration failure

If you store chilled or frozen goods, ask about:

• Deterioration of stock
• Refrigeration breakdown
• Public utilities failure (power outage)

Location matters: where the goods are kept

Most policies specify insured premises. If goods are kept elsewhere, you may need extensions such as:

• Stock at other premises (temporary storage)
• Customers’ premises (goods held off-site)
• Suppliers’ premises
• Exhibition risks (trade shows)
• Stock in transit (often separate)

If you use a third-party logistics provider (3PL) or shared warehouse, clarify:

• Who is responsible for insuring the goods
• Whether the warehouse has its own cover (and what limits apply)
• Whether your policy includes “goods in the custody and control of others”

How sums insured should be set (and why underinsurance is common)

The biggest risk with stock/WIP/finished goods is underinsurance.

Step 1: identify peak values

Insurers often care about your maximum value at risk, not your average. Think about:

• Seasonal buying
• Large customer orders
• Long lead times
• Bulk imports

Step 2: choose your valuation basis

Be clear whether your declared values are:

• Cost price
• Selling price
• Replacement cost

Step 3: consider stock declaration or adjustable policies

If your stock levels fluctuate significantly, you may be able to use:

• Stock declaration (declare monthly/quarterly values)
• Adjustable premium (premium reflects actual values)

This can reduce the risk of paying for cover you don’t need all year, while still protecting you at peak times.

The “average” clause: how it reduces claims

Many policies include an average (underinsurance) condition. In simple terms:

• If you insure for less than the true value at risk, the insurer may reduce the claim proportionally.

Example:

• True value of stock/WIP at time of loss: £200,000
• Sum insured: £100,000 (50% insured)
• Loss: £60,000
• Insurer may pay only 50% of the loss: £30,000 (less the excess)

This is why accurate sums insured and peak values matter.

Security and risk management: what insurers expect

Insurers often apply conditions or endorsements for:

• Alarm systems and maintenance
• Locks, shutters, and key control
• CCTV and lighting
• Fire alarms, extinguishers, and housekeeping
• Hot works controls (welding, cutting)
• Storage heights and aisle spacing
• Separation of flammables

These aren’t just “nice to have”. If a claim happens and a key warranty wasn’t followed, it can cause delays or disputes.

Special situations to discuss with your broker

Goods on consignment

If you hold goods you don’t own (or others hold yours), you may need:

• “Goods held in trust” wording
• Clear responsibility for insurance in contracts

Customer or supplier ownership

Clarify who owns the goods at each stage (Incoterms, title transfer, contract terms). Ownership affects who should insure.

High-value single items

If one item is worth a large chunk of your sum insured, you may need:

• Higher single-article limits
• Specific item listing

Hazardous materials

If you store chemicals, solvents, lithium batteries, or flammables, tell your insurer. Non-disclosure can cause serious issues.

What information insurers typically ask for

To quote accurately, insurers may ask:

• Maximum values for stock, WIP and finished goods
• Storage locations and construction of buildings
• Fire and security protections
• Nature of goods (combustible, theft-attractive, temperature-sensitive)
• Any previous losses
• How you value stock (cost vs selling price)
• Whether you use third-party storage or transit

Having this ready speeds up quoting and reduces back-and-forth.

FAQs

Is WIP covered if it’s on the production line?

Often yes, if WIP is included in the insured property and the production area is part of the insured premises. Confirm the definition and valuation basis.

Are goods in transit covered under stock insurance?

Not usually. You typically need goods in transit cover or a specific extension with clear limits.

Are customer returns covered?

Physical damage to returned goods may be covered if it results from an insured event while on your premises. But loss of value due to being “unsellable” may not be covered unless there’s physical damage.

Does insurance cover defective products?

Property insurance usually doesn’t cover the cost to fix or replace items that are defective due to poor workmanship or design. Product liability insurance covers injury or property damage to others, not your own product remake costs.

What about stock stored in a container outside?

Sometimes covered, sometimes restricted. Insurers may require specific security (container type, locks, location, fencing) and may apply lower limits.

Can I insure stock at selling price?

Sometimes, but it needs clear wording and is more common for retailers than manufacturers. Many policies settle at cost price.

A simple checklist to avoid gaps

• Confirm definitions of stock, WIP, and finished goods in your wording
• Set sums insured based on peak values
• Confirm valuation basis (cost vs selling price)
• Check cover for elsewhere, customers/suppliers premises, and in transit
• Review theft conditions and security requirements
• Consider deterioration of stock if temperature matters
• Understand the average clause and how it affects claims

Call to action

If you want to sanity-check your stock, WIP and finished goods values—or you’re not sure whether your policy covers goods at third-party premises—speak to a broker who understands your sector.

At Insure24, we’ll help you map where your goods are at each stage, identify the real peak exposure, and put cover in place that’s practical, compliant, and easy to evidence at claim time. Call 0330 127 2333 or request a quote via insure24.co.uk.