Insurance for Manufacturers: 5 Essential Considerations
If you own or run a manufacturing business, you already know that it’s a complex operation with a lot of moving parts—literally and figuratively. Whether you’re creating consumer goods, automotive parts, or high-tech components, having the right insurance in place is key to protecting your business from unexpected risks.
But what should you be focusing on when it comes to insurance? We’ve broken down the top five essential considerations for manufacturers when it comes to coverage. Let’s dive in.
1. Understanding Your Unique Risks
Every manufacturing business is different, which means your risks are unique to what you do. Do you rely on expensive machinery that would be costly to replace? Do you have a lot of raw materials on-site that could be damaged by fire or theft? Or maybe you have strict deadlines and any kind of delay could hurt your business?
Why it matters: Knowing what could go wrong helps you choose the right insurance. Talk to an insurance provider who understands the manufacturing industry. They’ll help you assess your specific risks—like equipment breakdowns, supply chain disruptions, or workplace accidents—and make sure you’re covered where it counts.
2. Covering Your Equipment
For most manufacturers, the machines and tools you use are the heart of your operation. If one of them breaks down, it could bring production to a halt. That’s where equipment coverage comes into play.
Why it matters: Equipment breakdown insurance ensures that if something happens—whether it’s a power surge, mechanical failure, or even operator error—you won’t be left shouldering the repair or replacement costs on your own. Having this type of coverage means you can get back to work faster with minimal financial hit.
3. Product Liability Protection
If you’re in the business of making things, there’s always a chance that something could go wrong with a product after it leaves your facility. Maybe it’s a defective part that causes damage or a finished product that doesn’t perform as it should.
Why it matters: Product liability insurance protects you if your product causes injury or damage. In the worst-case scenario, it can cover legal fees, settlements, and any associated costs if a customer sues your business. Think of it as a safety net for when something slips through the cracks.
4. Worker’s Compensation Insurance
Manufacturing jobs often involve physical labor, which means there’s always a risk of injury. Whether it’s a minor cut, a sprain, or something more serious, making sure your workers are protected is not just the law—it’s good business.
Why it matters: Worker’s compensation insurance covers medical expenses and lost wages if one of your employees is hurt on the job. It also helps protect your business from lawsuits related to workplace injuries. Plus, having this coverage shows your team that you prioritize their safety and well-being.
5. Considering Business Interruption Insurance
No one likes to think about their operations grinding to a halt, but things happen—fires, floods, and other disasters could shut you down unexpectedly. If you can’t produce goods, you’re losing money.
Why it matters: Business interruption insurance helps cover your lost income if you’re forced to pause operations. This can be a lifesaver for covering fixed costs like rent, payroll, and other expenses that don’t stop just because your production does. Having this protection in place can mean the difference between bouncing back after a disaster or struggling to recover.
Frequently Asked Questions
What Insurance Should Manufacturers Have?
When it comes to insurance for your manufacturing business, the right coverage depends a lot on your company’s size and revenue. For example, smaller companies with less than $15 million in revenue have different needs than larger ones with more than $15 million in revenue.
Smaller Businesses:
If your company falls into the smaller category, you’ll likely be covered by something called a Business Owner’s Policy (BOP). This is a handy package that bundles your property insurance with general liability coverage (including product liability), crime insurance, and more—all in one policy.
Larger Businesses:
For bigger companies, insurance tends to be a bit more complex. You’ll probably need a Package Policy, which bundles different types of coverage together. The main difference between a BOP and a Package Policy is that a BOP comes with a lot of extras already built in, while a Package Policy will need to be customized to get the same level of protection.
Additional Coverage to Think About
Beyond the basic property, liability, and workers’ compensation insurance, there are some extra types of coverage you might want to consider, especially if your business faces unique risks:
- Machinery & Equipment Breakdown Insurance
- Product Recall Insurance
- Manufacturer’s Errors & Omissions Insurance
- Cyber Insurance
- Environmental Liability Insurance
- Management Liability (including Directors & Officers Insurance)
- High-Limit Excess Insurance
- Trade Credit Insurance
These extra coverages can help protect your business from issues that aren’t usually covered by standard policies.
What does Insurance for a Manufacturer Cost?
The cost of insurance can differ quite a bit from one manufacturer to another. It’s tough to give a rough estimate without knowing specific details about your business. Factors like the size of your operation, the types of coverage you need, and your risk profile all play a role in determining the cost.
Reach out to our team and we will answer any questions you may have.
What Drives Up the Cost of Insurance for a Manufacturer?
hen it comes to business insurance for manufacturers, two major factors can impact the cost:
- Claim History: If your business has a higher-than-average number of claims, you’ll likely face higher insurance rates. On the flip side, a clean claim history can help keep your costs down.
- Risk Control Program: A strong risk control program can make a big difference. Manufacturers with a well-documented safety culture and effective risk management practices often benefit from lower insurance rates.
In short, a good track record and a solid risk control strategy can help you keep your insurance costs in check.
Do Manufacturers Need E & O Insurance?
For manufacturers, Errors and Omissions (E&O) insurance covers a specific risk that’s not included in general liability or product liability insurance. This type of coverage is crucial if your business works under contract with detailed specifications.
E&O insurance protects against financial damages caused by product defects, delays, or errors that affect your customers. If a lawsuit arises over these financial damages, and there’s no bodily injury or property damage involved, your general liability policy won’t cover it. This common gap can be addressed by purchasing manufacturer-specific E&O insurance.
What is the Best Insurance Company for Manufacturers?
Manufacturing risks present a distinct set of challenges that demand specialized insurance solutions.
Apex Risk & Insurance Services offers comprehensive coverage tailored specifically for the manufacturing industry. With a deep understanding of the unique profile of risks associated with manufacturing, We provide expert guidance and protection for a range of exposures including supply chain and product risks, facilities vulnerabilities, and human capital concerns.
Learn more about our commercial insurance policies for manufacturing, here.
Final Thoughts
Running a manufacturing business comes with its fair share of risks, but having the right insurance in place can give you peace of mind. Whether it’s protecting your equipment, ensuring you’re covered for product liability, or making sure your business keeps running smoothly even during tough times, these five essential insurance considerations can help safeguard your company.
Remember, it’s not just about having insurance—it’s about having the right insurance for your specific needs. With the right coverage, you can focus on what you do best—making great products—without worrying about the “what ifs.”
Any Questions?
At Apex Risk & Insurance Services, we want you to know and understand your options. We prioritize transparency and provide custom solutions to meet your insurance needs.
Reach out to our team to learn how we can support your manufacturing business.
Then, read on to learn more about How Much Excess Liability Insurance Manufacturers Need.
