Common Types of Manufacturing Insurance Coverage

Various types of business insurance help cover different aspects of manufacturing business operations. Understanding the common types of coverages available can help manufacturers choose insurance policies which meet their specific needs. While the terms and conditions of each policy may vary, the below provides a brief overview of common policy types.

Commercial Property Insurance

Manufacturing is a capital-intensive industry, with investments in physical assets like buildings and structures, furniture, fixtures, and raw materials typically forming a considerable part of the expenses. Commercial property insurance helps provide protection against losses resulting from damage to these assets caused by events like fires, theft, or certain natural disasters. This type of coverage helps ensure that manufacturers can recover quickly from physical damage to their property.

Business Interruption Insurance (BI)

While business interruption insurance is not typically a standalone policy, it is worth mentioning separately here due to its importance to manufacturing businesses. Business interruption insurance is typically available as an additional coverage option to a commercial property insurance policy. It's designed to cover the loss of income a business suffers after being unable to operate due to events that may be covered such as a fire or supply chain disruptions.

Contingent Business Interruption Insurance (CBI)

Contingent business interruption insurance and standard business interruption insurance are related but serve different purposes. CBI helps protect businesses from losses due to disruptions in the operations of suppliers, customers, or other third parties. While BI typically covers direct damages to the insured business’s operations, CBI generally covers indirect impacts from third-party disruptions. Businesses often consider both types of coverage to help safeguard against a range of risks. While BI is usually available as an additional coverage option to a commercial property insurance policy, CBI might require a separate policy or specific endorsement to cover disruptions affecting third-party entities.

Commercial General Liability Insurance

Commercial general liability insurance covers third party claims alleging bodily injury and property damage. It helps protect manufacturers against legal expenses and financial losses associated with such claims and also typically includes coverage for claims alleging personal and advertising injury.

Workers' Compensation Insurance

The manufacturing industry employs a considerable workforce involved in diverse tasks, ranging from operating heavy machinery to manual labor. Workers' compensation insurance covers medical expenses and lost wages for employees injured while performing their duties. This insurance not only helps manufacturing businesses ensure compliance with regulations but also can help protect the business from lawsuits related to workplace injuries.

Equipment Insurance

Unexpected machinery issues can halt production and cause considerable losses. Equipment insurance typically covers the loss, damage, or malfunction of machinery and equipment like those essential to manufacturing processes. This insurance helps provide financial protection and can allow businesses to minimize the length of interruptions due to equipment breakdowns.

Professional Liability Insurance

Professional liability insurance, often referred to as errors and omissions (E&O) insurance, can be crucial for manufacturing businesses that provide advice, design services, or other professional services alongside their products. Although typically associated with service industries, manufacturers might need this coverage if they offer consulting or design advice which could lead to claims of negligence or inadequate work. Manufacturers involved in sectors where specialized knowledge and advisory services are integral to their offering might find professional liability insurance particularly beneficial.

Environmental and Pollution Liability Insurance

Some manufacturing businesses face potential environmental risks due to their operations. Environmental and pollution liability insurance can offer protection against the financial implications of pollution-related claims, which can arise from both ongoing activities and historical environmental impacts. Manufacturing companies that handle hazardous materials or engage in activities with higher environmental risks may benefit from this coverage, which can help with cleanup and remediation costs and third-party liability protection against claims for bodily injury or property damage caused by pollution stemming from the company’s operations.

Product Recall Insurance

Product Recall Insurance helps provide liability protection when a product is recalled due to safety concerns or defects. This type of insurance is designed to cover expenses associated with product recall events, including the logistics of retrieving and disposing of the affected products, as well as communication efforts to inform stakeholders and consumers. Manufacturers operating in industries such as food, pharmaceuticals, and automotive, where strict regulatory compliance and consumer safety are paramount, typically consider this insurance critical.

Stock Throughput Insurance

Stock Throughput Insurance is a coverage solution designed specifically for manufacturing businesses, helping to provide protection from the moment raw materials are acquired until the finished product is delivered to the customer. This includes all stages of production and transportation. By covering the entire supply chain, stock throughput insurance helps ensure manufacturers can safeguard against risks such as theft, damage, or loss due to unforeseen events like natural disasters or accidents and maintain business continuity and resilience.