Top Businesses We Insure in the Manufacturing
Understanding Manufacturers Insurance
The manufacturing industry spans far and wide for a variety of products. Manufacturing processes differ depending on the end product and its usage; consequently, the risks and insurance needs vary. For instance, the insurance requirements of a textile mill and a coffee bean roasting company will differ drastically. The textile mill demands the usage of large manufacturing equipment and machines and complex processes while a coffee bean roasting company has large ovens but the process is fairly simple. Another difference is that with textiles, their use is for the outside of a human body while the end coffee product is consumed internally. Which do you think has a higher level of risk? Each manufacturer faces its own set of challenges. It is important to take into account the processes and materials involved as well as the end product before purchasing insurance policies.
Among the many types of manufacturer insurance policies that you could add to your Manufacturing Business Insurance, the following are the most important policies you should consider:
- General Liability including Product Liability Insurance
- Workers’ Compensation Insurance
- Stock Output Policy
- Commercial Property Insurance
- Business Interruption Insurance
- Equipment Breakdown Insurance
- Excess Liability Insurance
Protection From Risks With an Manufacturer Insurance Policy
Analyzing a situation and following through its repercussions will help you understand the usage and importance of certain policies.
Suppose a cylinder explodes within your manufacturing equipment, it will consequently have several deterring effects that gravely impact your business. Let us study the repercussions.
- The workers on the premises suffer from severe burns on the body. You will be held responsible for their medical bills and percentage of lost income. Your Workers’ Compensation Insurance will cover the same for you (if you have not exempted yourself). It includes limited funeral expense and death benefit to families in the case of a fatality. In the event that there was negligence in the maintenance of the equipment which caused the incident, the employer’s liability portion would defend your business from emplyoee lawsuits.
- The ensuing property damage to your building, contents and other manufacturing equipment resulting from the mechanical malfunction would be covered under an Equipment Breakdown policy, assuming there was no negligence on your part.
- The client present on the site also incurs bodily injury as a result of the incident. He sues you for bodily injury and medical expenses for the injuries. Your General Liability Insurance will cover the bodily injury and also property damage of third-parties.
- The incident causes your business to close. You now need to either relocate to a new space or wait until equipment is replaced and all repairs are made. Assuming you have purchased Business Interruption Insurance, it will respond to the loss of revenue caused by the shutdown and if extra expense coverage was included, would assist with the cost to relocate or expedite the replacement damaged equipment.
Recommended Insurance Policies For Manufacturers
A Package Policy encompasses general liability (including Product Liability) and property insurance, and by endorsement, you can add a multitude of other types of coverage, such as Business Income & Extra Expense Crime, Inland Marine (Transit) and Equipment Breakdown insurance. This policy, with the proper coverage included will cover bodily injury, and property damage liability to third parties, damage to your property and equipment, lost income, theft from employees, damage to your product during shipment, and many more types of loss. The customizable nature of this policy protects you against the most relevant types of claims.
Workers’ Compensation Insurance
Workers’ Compensation is mandated in most states. State laws make the employer liable for injury to employees while on the job. Most employers are financially unable to fulfill that responsibility on their own so they purchase a worker’s compensation policy. By purchasing this policy, the employer transfers the responsibility to pay lost wages, medical expenses, or death benefits to the insurance company. Since manufacturers may have a higher rate of injury, it is important to secure workers compensation to assure employee wellbeing and comply with state law.
Product Recall Insurance
Product recall coverage is not included within the manufacturer general liability policy. Whether you manufacture automobiles or are a food processor, if your product is causing bodily injury or property damage, you will need to recall the product and your company will need to bear the cost of the recall. As you can imagine, the cost to recall the product, repair or replace it and expenses to do so will add up to quite a tidy sum. Lack of this coverage when there is a malfunction or contamination with your product, will likely cause your business to close. While your general liability would respond to the bodily injury or property damage caused by your product, it will not cover the costs involved in a product recall event. In addition to these finite expenses, consider the reputational harm to your brand and alienated customer base as well as the financial fall out ensuing for businesses of all sizes. Just think, cell phone batteries catching on fire, faulty tires causing car accidents, poorly designed or manufactured child car seats, lettuce contaminated with E. coli and you get the picture. Besides manufacturers, a recall by the US Consumer Product Safety Commission could also affect the wholesaler that distributed the product and the retail shop that sold the product.
Marine insurance is a general insurance term which encompasses many different types of insurance, Ocean Marine and Inland Marine insurance is designed to cover property while away from your business premises. Obviously “wet” or ocean marine covers goods while transported or used over water while inland marine covers property over land. Transit Insurance is a type of marine insurance that covers your goods or products while being transported from your location to the destination for a specific set of perils. Any manufacturing business can benefit from this policy as all types of raw materials or products can suffer loss during transit from point A to B. Overseas shipments, often the most economical way to distribute product can easily suffer loss from a ship sinking, a fire onboard or piracy. Over land shipments can suffer damage from vehicle accident, change in temperature or vehicle fire.
Another type of Inland Marine coverage applicable to manufacturers is a Manufacturers Output Policy often called a MOP or more recently a Commercial Output Policy (COP) since it favors more than just manufacturing risks but also industrial and processing sectors. This type of policy combines the above-mentioned transit coverage with property insurance on one policy that is rated using a unique system that often is priced much more competitively than a standard business property policy, providing coverage on your product during the manufacturing or processing phase and while in transit.
Comprehensive Manufacturer Insurance Costs
No two businesses are the same. The risks your business faces and insurance policies that cover those exposures depend on your processes and products. We present a host of insurance policies that protect your business in different ways. Our agents will brief you about the best-suited policies after reviewing your operational factors such as your product, processes, revenue, payroll, claim history, location, assets, and distribution area. Products distributed outside of the US and its territories need worldwide general liability coverage for suits brought outside the US.
Eligible Businesses For Manufacturer Insurance
Every and any business that involves manufacturing, wholesaling or retailing products will benefit from the manufacturer insurance policy.
Few examples of the businesses that fall within the sector are as follows:
- Furniture Manufacturers
- Iron, Steel, Aluminum Industries
- Food Processing& Manufacturing
- Personal Care & Toiletry Product Manufacturers
- Apparel Manufacturers
- Plastic & Rubber Manufacturers
- Chemical Product Manufacturers
- Medical Equipment and Drug Manufacturers
Frequently Asked Questions (FAQ) about Manufacturer Insurance
1. How much does insurance cost for cosmetics manufacturers?
Small cosmetics manufacturing businesses generally pay $57-$89 per month for a standard $1,000,000/$2,000,000 General Liability Insurance policy, depending on their location, size, revenue, and claims history.
2. What is the best business insurance for food manufacturers?
The best business insurance for food manufacturers is general liability insurance, product liability insurance, workers’ compensation insurance, commercial umbrella insurance and commercial property insurance and inland marine insurance.
3. What is the most common E&O manufacturer insurance claim?
Product liability claims are the most common types of claims for manufacturers. Usually provided with general liability insurance, it applies when a manufactured product injures someone or damages someone’s property.
4. How much do manufacturing companies pay for liability insurance?
There are too many variables to give a cost. Commercial General Liability insurance is based on a number of factors such as, type of product (is it edible, does it get applied to the body, is it electrical, etc.), annual gross sales (the more sales the more exposure to loss), distribution (is it sold worldwide, is coverage needed for injuries occurring outside the US, its territories and possessions, Canada?)