Overview
The “Goods Held in Trust” clause in fire insurance ensures that property or goods stored by an insured party—but owned by someone else—are also protected under the fire insurance policy. This clause is especially relevant for businesses such as warehouses, distributors, and logistics companies that handle third-party goods.
In the event of fire damage, the policyholder can claim compensation not just for their own assets but also for goods held on behalf of clients or vendors, provided they were disclosed at the time of policy issuance or included under the trust clause.
This clause reduces liability risks and improves client confidence, making it essential for companies involved in storage, processing, or handling third-party goods.
Fire incidents can be destructive and disheartening as they occur. Fire accidents can cause substantial emotional and financial loss. It is prudent for businesses, irrespective of the size and sector, to avail of fire insurance policy to safeguard themselves financially from the losses that may arise from fire incidents. It’s helpful to comprehend the ‘goods held in trust’ clause in fire insurance.
Fire insurance is an insurance policy that provides financial protection against unpredictable perils. The fire insurance policy coverage includes unfortunate incidents caused due to fire, explosion, lightning, and implosion, as man-made calamities like a riot, strikes, malicious acts, bursting of pipelines, leakages, and natural calamities like storms, floods, cyclones, bush fire, etc. You can customise the policy based on your need and get additional coverage like riders to enhance the coverage suitable for your business.
Though a fire insurance policy provides comprehensive coverage, there are certain important things to be considered while buying a fire insurance policy. You need to consider the scope of coverage, limitations, and the various clauses in the policy to ensure your claim process in the future is hassle-free. In fact, not knowing your fire insurance policy better can lead to the rejection of claims or hassles during the claim process. Hence, it is important to know all the clauses in the fire insurance policy. ‘Goods held in the trust’ is one such clause.
What does the ‘goods held in trust’ clause entail in fire insurance?
The organization or a group of people holds and protects goods on behalf of others. In essence, the fire insurance policy’s ‘goods held in trust’ clause recognizes that it doesn’t provide coverage for goods insured by the policyholder. In case of loss or damage caused by covered perils, individuals hold these goods in trust, deposit, or commission, or jointly own them with others.
The Trust Clause – Example
Let us take an example to understand this. Let us say you have a garage that has a huge space in which you have stored some goods owned by your friend. You would keep this in your garage just as a gesture of friendship. Let’s consider a scenario: Regrettably, your garage catches fire, resulting in damage to all the goods. Therefore, it is important to note here that your fire insurance policy would compensate you for the loss excluding the loss of goods that belongs to your friend. At the time of estimation of losses due to the fire incident, the surveyor considers the ‘goods held in trust’ clause. So, your insurance company makes no compensation for the goods held in trust. In this case, fire insurance policy availed by your friend to cover the goods from unpredictable perils can only provide financial security to the goods.
There are many clauses like this in your fire insurance policy. Some of them are agreed bank clause, earthquake fire & shock, designation of a property, escalation clause, and temporary removal of stocks clause, etc. Here, a clear understanding of each clause is essential. Along with the clauses, it is important to read the fire insurance policy’s exclusions, terms, and conditions. All information is available for the online fire insurance policy, which can help you take a better decision.
It is important to know that losses and damages caused by electrical and mechanical breakdowns, war and nuclear perils, pollution, contamination, housebreaking, burglary, etc., are not covered under the fire insurance policy.
Hence, the financial protection against unforeseen damages and losses caused by fire incidents is extremely important to reduce the distress of the incident. You can buy a fire insurance policy online with a simple process to avail of complete protection against such perils.
FAQs
Q) What is the “Goods Held in Trust” clause in fire insurance?
A) It refers to coverage provided for third-party goods that are in the insured’s possession when a fire or related peril causes damage.
Q) Who needs the goods held in trust clause?
A) Businesses like warehouses, cold storage units, transporters, or manufacturers who store goods that belong to others.
Q) Does fire insurance cover third-party goods by default?
A) Not always. The goods must either be declared or covered specifically under a “Goods Held in Trust or Commission” clause.
Q) What is the benefit of including this clause?
A) It extends the protection to client-owned goods, ensuring liability coverage and client trust in case of damage.
Q) Can you claim for goods held in trust if they are not declared?
A) Generally, undisclosed third-party goods may not be covered unless explicitly stated in the policy under this clause.
Q) Is “Goods Held in Trust” clause mandatory in fire policies?
A) No, but it is highly recommended for businesses that regularly store or handle property owned by others.
About The Author
Shivani
MBA Insurance and Risk
She has a passion for property insurance and a wealth of experience in the field, Shivani has been a valuable contributor to SecureNow for the past six years. As a seasoned writer, they specialize in crafting insightful articles and engaging blogs that educate and inform readers about the intricacies of property insurance. She brings a unique blend of expertise and practical knowledge to their writing, drawing from her extensive background in the insurance industry. Having worked in various capacities within the sector, she deeply understands the challenges and opportunities facing property owners and insurers alike.
