What Types of Insurance Do You Need as a Manufacturing Company?

Posted on Jul 27, 2021
What Types of Insurance Do You Need as a Manufacturing Company

In the manufacturing industry, having the proper insurance is critical. While every company hopes that all pieces of the manufacturing machine run smoothly at all times, this is not always the case. 

Manufacturing companies’ needs vary by industry. However, all manufacturing companies should have general liability insurance, commercial property insurance, business income insurance, and professional liability insurance.  These coverage sections can be rolled into one commercial insurance package offering a more efficient and economical alternative.

What Do Commercial Package Policies Cover?

A commercial insurance package is a combination policy made up of several coverage sections   

  • Commercial general liability insurance protects against lawsuits from actual and alleged claims for  bodily harm or property damage as a result of your on-site manufacturing operations and the products that you make
  • Business property insurance protects your building, contents, inventory, and machinery and can also be extended to include tools. If you suffer a fire, property insurance will cover the costs of repair and replacement for your fixed assets.
  • Business income insurance protects a business from lost income as a result of a property damage claim. If that same fire mentioned above also stops production, business income coverage responds, avoiding a significant financial loss during the downtime.
  • Professional liability is purchased when as a manufacturer, you design, sketch, or draw plans that are wholly relied upon in the manufacturing process.  Should these plans have an integral error that renders your product unusable, professional liability can offset the loss. Intellectual property (IP) coverage should be considered for any designs etc., that are patented or pending patents helping to protect you from legal costs associated with theft or infringement of intellectual property.

Each policy is unique, so it is vital to understand exactly what is covered and excluded in your specific policy. If your manufacturing business has confidential or proprietary customer information on-site and/or exchanges ideas over the internet, it is smart to include a data breach 1st party and cyber liability 3rd party coverages.  

Other Types of Manufacturer’s Insurance

Commercial package policies are fantastic and cover many issues that can arise for manufacturing companies. They do not cover everything, though. Other helpful types of insurance include:

Manufacturing is more dangerous than other types of industries. Operating massive printing, stamping, lathes, and other equipment carries significant risk; even fully automated manufacturing equipment has to be serviced by people. Workers’ compensation is a mandated coverage that covers the cost of medical expenses and rehabilitative care resulting from a workplace injury.

Environmental liability insurance supplements general liability insurance extending coverage to insure contamination and the related costs of clean-ups as a result of equipment failure that could leach toxins into the environment.  

What Risks Do Manufacturing Companies Face?

Manufacturing plants are typically large physical locations with employees and equipment working in loud, tight spaces. At any given time, there are likely millions of dollars in assets being operated and handled. It is critical that these assets are insured so that mishaps do not become disastrous.

There are other, less obvious risks that manufacturing companies experience on a day-to-day basis. These include:

  • Damage or theft to cargo in transit: When these multi-million-dollar pieces of equipment are being shipped to plants across the country, one traffic accident or truck jacking can leave a manufacturing company with huge losses.
  • Equipment malfunctions and breakdown: In the manufacturing world, equipment is essential — and often expensive. Numerous valuable parts have to run smoothly for work to get completed. Should a piece of equipment break down, the consequences can be costly.
  • Recalled products: A concern with manufacturing is that the product will make its way to the public before it’s deemed unsafe. Pulling products off the shelves is a costly but often necessary endeavor in terms of product liability.
  • Off-premise utilities coverage: Power outages, water disruptions, and gas line issues, for example, can force you to close your manufacturing doors temporarily, resulting in potentially major financial loss.
  • Proprietary software breaches: In today’s age, technology goes hand in hand with manufacturing. Unfortunately, the more software is integrated into the manufacturing world, the easier it is for hackers and cyber criminals to gain access to confidential information.

These are by no means the only risks related to the manufacturing industry. That’s why it’s so important to be adequately insured in the event of a crisis. Manufacturing is a large part of the U.S. economy; manufacturing companies that are fully insured can weather natural disasters, lawsuits, equipment failures, negative press, and more.

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