Milk Manufacturing Insurance

What You Need to Know About Milk Manufacturing Insurance

Ann Herro | July 20, 2018
White plastic milk bottles on the conveyor in a dairy plant

Milk manufacturers and processers help get the world’s most popular and essential beverage safely to consumers. Processing milk for mass consumption involves a delicate process of heating, cooling, separating, storing, adding ingredients, and packaging to ensure quality, safety, and great taste. 

At any point in the process—from pasteurization to placement on store shelves—something can go wrong that destroys your machinery or plant, destroys your milk products, or causes the products to be unsafe for consumption. 

You need milk manufacturing insurance to provide a financial backup, so you can protect your livelihood and continue to operate. 

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Why Do I Need Milk Manufacturing Insurance? 

Manufacturing fluid milk is the process by which milk is processed for beverage use. It involves a long and complex process of: 

  • Standardization
  • Pasteurization
  • Homogenization
  • Vitamin fortification

All of these processes must be done to exacting standards in order to produce safe and tasty milk. But during that process:

  • Equipment can fail, causing injuries, damage to other machines, contamination, manufacturing disruption, and shipping delays.
  • Severe weather, truck accidents, fires, and power outages can cause product loss or contamination, lawsuits, and fines.
  • Contaminated products can seriously harm consumers.
  • Product recalls can lead to huge expenses and a permanently damaged reputation.

You need specific milk manufacturing insurance coverage designed for your unique risks and needs. 

The Truth About Product Recalls

Dairy products are the 4th most-recalled food category in the US.  At any point in the milk manufacturing process, milk can become contaminated and unsafe to consume. 

Improper pasteurization is one of the many production errors that can cause milk to become contaminated and lead to a recall. Proper pasteurization heats milk to eliminate dangerous bacteria like Listeria and Salmonella. 

If the temperature is not high enough or the milk is not heated for long enough, bacteria can grow and contaminate the milk. People who consume contaminated milk are at risk for serious stomach illness and even death. 

When a contaminated product is discovered, either through random testing or after someone gets sick, it must be recalled from the market. Recalls are tremendously costly for food manufacturers and their business partners. In some cases, business relationships are permanently damaged, and consumer confidence in the brand or product never recovers. 

Product Recall Insurance for Milk Manufacturers 

A study by the Food Marketing Institute and the Grocery Manufacturers Association estimates that the average cost of a recall for a food manufacturer is $10 million—not including ongoing lost sales and reputational damage. 

In general, a single product recall might involve the following types of costs:

  • Product removal (pulling the product from the marketplace)
  • Product storage and disposal
  • Product replacement
  • Communications, including detailing the recall to public and government agencies and continued public relations
  • Investigation (determining the source of the contamination)
  • Fines, legal fees, settlements and judgments

After the immediate crisis subsides, the costs of a recall can continue to haunt your business for years in the form of decreased sales, reputational and brand harm, and decreased stock value.

Product recall insurance can help you with many of these costs, and might even help you avoid bankruptcy or closing your doors. It typically will reimburse a manufacturer for financial losses related to a product recall, including:

  • Actual recall costs (product removal and disposal)
  • Loss of profit
  • Product replacement
  • Extra expenses
  • Reputation rehabilitation expenses
risk graphic for milk manufacturers

Property Insurance for Milk Manufacturers

Commercial property insurance helps protect your manufacturing facilities (buildings) and their contents (separators, refrigeration equipment, pasteurizers) in the event of fire, weather events, theft, vandalism, and other covered perils. 

In addition, talk to an agent about various other types of property coverage that you might need: 

  • Business interruption coverage, or business income coverage, protects your earnings if your business is unable to operate because of fire, hail, wind, equipment breakdown, etc. If you are forced to close your doors for a while in order to make repairs, it pays for rent, employee salaries, lost income, relocation fees, and more. 
  • Utility interruption coverage reimburses you for costs related to breakdowns in utility services (water, electrical) that force you to temporarily stop butter production. 
  • Boiler and machinery, or equipment breakdown coverage, helps you repair or replace damaged machinery that is essential to keeping your production line working. This is invaluable protection for broken or damaged pasteurizers, separators, packaging equipment, and any other equipment that you need every day. 
  • Cargo and goods-in-transit coverage, including ocean marine coverage and inland marine coverage, protects your products as they are transported from place to place. 
  • Spoilage coverage offers financial protection for the costs of goods that spoil on-site. Milk manufacturers have a huge spoilage risk. An agent can help you decide how much coverage you need and the types of situations that need to be covered. 
  • Additional flood, windstorm, or earthquake coverage may be necessary to protect your business property, depending upon your location.

Liability Insurance for Milk Manufacturers

Commercial general liability (CGL) insurance provides broad liability protection for injuries and property damage that occur on your premises or because of your carelessness. 

If a customer is involved in an accident in your milk processing plant, your CGL coverage will pay for any related medical bills. CGL insurance also pays for repairs or a replacement if a customer’s personal property is damaged on your premises.

Additional liability coverage is probably necessary for your milk manufacturing business. An independent agent can walk you through your options and help you decide what coverage you need. 

  • Product liability insurance, including completed products coverage, helps you pay for losses or injuries to a user, buyer, or bystander caused by a defect or malfunction of your product. Dairy products are particularly vulnerable to product claims. If you are sued because a customer becomes ill because of your product, product liability coverage pays for damages and medical bills.
  • Environmental practices or pollution liability coverage protects companies from the costs associated with damage caused by improperly disposing of hazardous waste or causing environmental harm.
  • Commercial auto coverage is necessary if your business owns and operates any vehicles. It covers your vehicle fleet and drivers in the event of an accident or other vehicle damage that occurs as you transport your product from place to place.
  • Directors and officers (D&O) liability insurance provides protection for directors and officers of companies against legal judgments and costs arising from a variety of different business decisions. Directors and officers of a milk manufacturer could be sued and held responsible if their decisions resulted in contaminated products that caused harm to a consumer. 
  • Excess liability coverage, or commercial umbrella coverage, provides liability protection above and beyond the liability coverage included in a commercial general liability and business auto policy. A commercial umbrella policy would pay when your other liability coverage has been exhausted. 

Milk manufacturing employees work in a dangerous environment, even if you have strict safeguards in place. Workers’ compensation insurance protects employees from the costs of workplace injuries and illnesses. 

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How Much Does Milk Manufacturing Insurance Cost? 

The cost to insure your milk processing business depends on several factors, such as the size of your business and the types of policies you need to cover your unique risks. An agent can help you determine exactly what coverage you need and the right coverage limits and deductibles. 

You can expect the costs of any policy to depend on factors like: 

  • Number of employees
  • Types of manufacturing equipment
  • Number and type of owned vehicles
  • Size and location of your building 
  • Volume and geographical distribution of your products

Find and Compare Quotes

An independent agent can work with you one-on-one to determine the types and amounts of coverage you need. Your agent can get quotes from multiple insurance companies so you can evaluate the cost and coverage options and make the best choice. 

Benefits of an Independent Agent

Our agents simplify the search process for finding the right milk manufacturing insurance. They’ll walk you through some handpicked policy options and explain the details.

Most importantly, they’ll be there for you when claim time comes. They know the ins and outs of the process and will make sure your claim is handled appropriately. 

TrustedChoice.com Article | Reviewed by Paul Martin

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