The Risks Your Product is Creating for Your Manufacturing Business
Manufacturing encompasses a broad range of businesses that vary in size, organization, and especially in what they make and who they make it for. Regardless of the end product, a manufacturer of any size needs to protect its assets from the costs of fires, employee injuries, lost inventory, auto accidents, equipment breakdowns, and lawsuits that can be related to any of these events, and more.
You need manufacturing insurance to help mitigate your risks. Manufacturers insurance covers you with a combination of insurance policies that are most suitable for your business.
How Risky Is Manufacturing?
Your employees probably work with a variety of heavy, expensive, and dangerous industrial equipment. Your facility may contain flammable or dangerous materials. Perhaps your business is located in an area that is prone to tornadoes or other damaging weather events. If you, your employees, or your products cause injuries or property damage to other parties, you can be sued.
One of the biggest threats you face as a manufacturer is fire. According to the National Fire Protection Association:
- Fires result in $1 billion in annual losses for industrial or manufacturing properties each year.
- Heating equipment, shop tools, and industrial equipment are the leading causes of structure fires in manufacturing facilities.
- Mechanical failures or malfunctions are a contributing factor of 1 in 4 structure fires in manufacturing facilities.
You also face a variety of other threats, such as:
- Weather and other natural disasters
- Theft or vandalism
- Breakdown of equipment and machinery
- Employee injuries and illnesses
- Damage to products and inventory in transit
- Products that cause damage or injury to others
- Lost income and business interruption
You need to protect your property, your employees, and any other persons or property that come into contact with your business or products, with tailored manufacturing insurance solutions.
Protect Your Property With Manufacturers Insurance
No matter what you manufacture—metals, plastics, clothing, furniture—you need a comprehensive manufacturers insurance program to protect your business from risks. Your manufacturing facility probably contains various materials used to manufacture your products. Perhaps you have flammables such as fabrics, plastics, or wood on hand. You may use paints, lacquers, or other toxic chemicals.
All of these materials, in addition to your buildings, equipment, and other inventory, can be damaged by fire, theft, vandalism, and weather or other natural disasters. No matter what type of unforeseen event occurs, you need manufacturers property insurance to protect your business.
- Commercial property insurance covers your buildings and their contents in the event of fires, theft, vandalism, and certain weather events. Your warehouses and office space, office equipment, industrial machinery and equipment, and materials inventory can all be covered with a commercial property policy. An independent insurance agent can help you evaluate how much coverage you need for your plant, equipment, and inventory. Proper valuation of your business property is essential to making sure that you will be sufficiently reimbursed in the event of a loss.
- A commercial property policy also provides coverage for business interruption, or circumstances where a covered event (fire, tornado, etc.) causes damage that forces you to temporarily close while you make repairs or relocate. Business interruption coverage pays for lost income and ongoing expenses (employee salaries, rent, etc.), and may even pay certain relocation expenses for a specified period after a covered loss. You may even be able to insure your manufacturing business for lost income due to interruptions in utility services, such as electrical and water services. Ask your agent how to add this coverage to your business property policy.
If your equipment broke down, would you be able to operate, pay for expenses, and earn revenue? Some manufacturing equipment is so specialized that it may take months to replace. What would happen to your business while you waited?
- Equipment breakdown coverage (also called boiler and machinery coverage) can supplement your manufacturers property insurance policy. It covers breakdowns due to power surges, motor burnout, boiler malfunction, and even operator error. It provides reimbursement for the costs to repair or replace damaged machinery, as well as related lost income and business interruption costs.
Manufacturing insurance should also provide coverage for any products or materials that are on the move. Inland marine insurance is designed to protect you from financial losses when cargo of any kind is damaged in transit. Your Trusted Choice® insurance agent can help you find inland marine insurance that is customized for the type of manufacturing that you do.
How Can You Protect Your Manufacturing Business From Lawsuits?
Manufacturers can be sued for just about any reason. Whether you make shoes or straws, at some point your business could be accused of negligence and causing harm to a person or another business. While you may not often have members of the general public on your business property, your business can still pose a threat to others in a variety of ways.
You need manufacturers liability insurance that is tailored to how your business operates and the products that you make. Liability insurance protects manufacturers from third-party claims of negligence and the costs associated with lawsuits.
- Commercial general liability (CGL) insurance is essential for any manufacturer. It is necessary when your business is negligent and causes bodily injury or property damage to a third party. It covers direct costs related to the incident (property repair costs, medical expenses) as well as attorney fees, court costs, settlements, and court-ordered judgments, up to the limits of your policy.
- Product liability insurance covers a manufacturer’s responsibility for losses or injuries to a user, buyer, or bystander caused by a defect or malfunction of their product. This is typically in the form of manufacturing or production flaws, design defects, or defective warnings or instructions.
- Commercial umbrella insurance, or excess liability insurance, provides additional liability protection on top of the coverage provided in your CGL policy. When the limits of certain applicable liability policies have been exhausted, your excess liability policy kicks in. This is important coverage in the event that a covered claim exceeds the amount of coverage available from any other applicable policy
Should You Get a Business Owners Policy?
Some small- to medium- sized manufacturers may qualify for a business owners policy, or BOP. A BOP provides basic property, liability, and business interruption coverage in one convenient and affordable package policy designed for smaller businesses.
Any BOP can be customized to cover your specific risks. In addition, you can purchase more comprehensive insurance for manufacturers by adding endorsements to your BOP as well as purchasing other standalone manufacturing insurance policies.
Your independent agent can help you determine if a business owners policy is the right solution for your manufacturing business.
Protect Your Fleet of Autos with Commercial Auto Insurance
Most manufacturing companies need commercial auto insurance. This typically covers cars, trucks, trailers, vans and other vehicles designed for use on public roads. Only a business auto policy can provide proper protection for vehicles being driven for business purposes.
You can customize your policy to cover:
- Vehicles that your business owns
- Vehicles that your business owns, leases, or hires
- All vehicles that are used for business purposes, including those that the business does not own, lease or hire (e.g., personal vehicles that are driven for business purposes)
You can list each vehicle on your policy and carry different coverage for each depending on the vehicle’s characteristics and the coverage you need for it.
Workers’ Compensation Insurance for Manufacturers
Your manufacturing facility presents many potential dangers for your employees. They may come into contact with heat or dangerous chemicals, sharp or dangerous tools, heavy machinery, and a variety of other dangers. Employees are at risk for lost or crushed hands or limbs, eye injuries, burns, lung irritation, and other potential injuries or illnesses. Even employees who simply perform repetitive tasks every day are at risk for a variety of injuries.
Safety is important not only for your employees, but also for your long-term financial stability. Unfortunately, no matter how safe your manufacturing facility is, accidents happen. You need workers’ compensation insurance to protect your employees and your business from the costs of workplace accidents and injuries.
Workers’ compensation insurance is required for most employers. Each state has its own statutes that govern its workers’ compensation insurance program. Those statutes determine the amount of benefits an injured employee is entitled to, what types of injuries are covered, and how medical care will be delivered. In general, workers’ compensation insurance covers the costs of medical care for the injured worker, as well as income replacement if they cannot return to work for a while. Workers’ compensation insurance may also provide death benefits if a worker is killed at your facility.
Work with Your Agent for Tailored Manufacturing Insurance Quotes
Whether you are a multi-location manufacturing conglomerate, or a small, specialty manufacturer, you need tailored manufacturer insurance that is customized for your size, the products you make, and the number of employees that you have. Any of your property or liability policies can and should be specifically designed to cover what is unique about your business. And with the advice of your Trusted Choice® independent agent, you may find that you need additional insurance policies designed specifically for your type of manufacturing business.
Local agents can access multiple manufacturers insurance companies, compare many policies, and find the one that fits your operation. Simply contact an agent in your area to learn more about manufacturers insurance.
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