Everything’s Covered: The Ins and Outs of Manufacturing Insurance You Can’t Afford to Ignore

Listen to your bustling production line, machinery and people humming. Now, strip away the noise—the chatter, the mechanical rhythm, all of it—and replace it with an eerie silence after a disaster strikes. This scenario isn’t far-fetched. It illustrates what could happen without adequate manufacturing insurance coverage. The threats are real and potent, from fires that can turn assets into ashes to product recalls that can skyrocket into million-dollar losses.

Key risks manufacturing companies need to cover

Manufacturing insurance isn’t just a piece of paper tucked away in a drawer for a rainy day—it’s your business’s umbrella (not to be confused with umbrella insurance), raincoat and boots all rolled into one. This type of insurance protects against the unique risks associated with your manufacturing business, extending beyond what’s covered by standard business insurance policies. Common challenges manufacturing insurance typically cover are:

Business property and equipment breakdown coverage

Natural disasters and equipment malfunctions can strike the workplace with little warning. Comprehensive property damage coverage addresses issues from fires, theft and natural disasters, while equipment breakdown insurance restores operational capacity without unbearable out-of-pocket expenses.

Workers compensation

No matter how stringent your safety measures are, accidents happen. Workers’ compensation covers medical costs and lost wages for injured employees, thus fortifying your workforce’s morale and your company’s legal standing.

Product recall liability

In the era of consumer rights, one faulty product can lead to multi-million-dollar lawsuits. If a single step is missed on the production line and a product fails, the fallout is not limited to the recall expenses but stretches to potential legal entanglements and lasting brand damage. Product liability insurance protects manufacturing companies against financial losses from such claims, ensuring that a single error does not spell the end for your business. This coverage is normally added to the General Liability Policy with a standard limit of $1,000,000. Higher limits may be available.

Business interruption & extra expense

It’s Sunday morning and your facility is on fire and has significant smoke damage. Do you have a disaster recovery plan for Monday morning? You now have damage from the water used to extinguish the fire and smoke damage has ruined the electronics on your equipment. Business interruption coverage doesn’t just cushion against lost business income during these downtimes; it’s the financial bridge that keeps you afloat, ensuring payroll and bills are met without disruption.

Transit & motor truck cargo

Whether it’s across town or across borders, your products face risks in transit. Transportation and cargo insurance provide certainty in the unpredictable journey of goods, covering everything from theft to damage.

Cyber liability & ransomware attacks

The manufacturing industry’s digital transformation has brought about increased efficiencies and capabilities but also new risks, especially cyber threats. As manufacturers incorporate more technology into their operations, the potential for cyberattacks increases. Cyber liability insurance is becoming essential, defending against data breaches and ransomware that can devastate your finances and reputation. This coverage supports everything from forensic investigation to customer notifications and recovery measures.

Contingent business interruption coverage

The recent global crises highlighted how quickly supply issues could escalate into significant production delays. Contingent BI can provide expense reimbursement if one of your vendors experiences a covered cause of loss and cannot provide the needed products. This insurance can be customized for your operations and can reimburse lost sales or extra expenses incurred when normal operations are disrupted, helping manufacturing businesses navigate unexpected supply chain issues.

Manufacturers’ error and omission professional liability

Precision is paramount, yet human errors occur. Engineers in the manufacturing industry can obtain professional liability insurance, which protects against errors and omissions. This means they are insured against claims of mistakes or oversights in their work, which could result in financial losses. The insurance also covers instances of negligence, such as when engineers fail to meet industry standards in their designs or consultations. In case an engineer is sued over their professional services, this insurance helps cover legal defense costs, including court fees and settlements. Suppose an engineering error results in product failure, causing severe bodily injury or property damage. In that case, the insurance can cover compensation payments.

Why one-size-fits-all doesn’t work in the manufacturing industry

Manufacturing insurance is not just about covering the obvious gaps; it’s about your risk control, foreseeing the unforeseeable and preparing your business for everything that comes your way.

No two manufacturing operations are the same, and neither are their risks. That’s why every company should perform a thorough risk assessment to understand specific vulnerabilities, whether related to the type of materials used, the manufacturing processes or the end products. 

Checklist: Assessing risks in your manufacturing business

Manufacturers should conduct detailed risk assessments to tailor insurance solutions to their unique risks. Here’s a simple checklist to guide manufacturers in evaluating their risk landscape:

1. Inventory your assets: Include all physical and digital assets.
2. Evaluate your processes: Understand both manual and automated aspects of production.
3. Identify regulatory exposures: Stay updated on OSHA and other regulatory bodies.
4. Consult with experts: Use quality assurance advisors and risk management specialists.
5. Review past incidents: Analyze past claims to identify frequent or severe issues.

This proactive approach allows businesses to adjust their insurance coverage to match their evolving risk profile, ensuring they are always adequately protected.

Looking beyond the insurance policy

Each day can introduce a new risk for manufacturers, and insurance does more than protect against financial loss; it provides peace of mind and stability in a volatile world. As risks evolve, so should your coverage options and strategies for managing them. Regularly updating your insurance to reflect your current operational hazards is not just good practice—it’s essential for survival in today’s competitive market.Insurance isn’t just another line item on your budget—it’s a crucial investment in your company’s future. If you’re concerned about the hidden risks lurking within your business, get in touch with Crane Agency today to schedule a consultation and learn how to properly assess and mitigate these risks.