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business insurance

Insurance that manufacturing businesses must have

business insurance

Manufacturing refers to the business activity that involves the usage of raw materials and other components to put them into finished goods or merchandise that are then sold in the market. These products are usually produced through human labour or through the usage of machinery and robots, too. Businesses that engage in the production of these finished goods are referred to as manufacturing businesses. In the manufacturing business, the finished product passes through various stages of production, which involve labourers with diverse skills before it finally emerges into its end product. A manufacturing business may directly sell its product, or distribute it to another manufacturing business or a wholesaler or a retailer.

Like all other businesses, manufacturing businesses can also be susceptible to unforeseen circumstances, risks and financial losses. Hence, it is imperative for manufacturing businesses to have insurance policies that would help them deal with those issues. An account of important insurance policies that manufacturing businesses must buy is provided below.

  • Product Liability InsuranceIf a customer suffers any injury, bodily harm or even death due to the damages by a product that has been sold to them, they can sue the product manufacturing company. For instance, there have been many cases of electronic products bursting while they are being used, which have led to bodily harm. The products sold can be electronic goods, vehicles and even food and beverage. This insurance policy helps pay for the legal and settlement costs that are claimed if a customer sues a manufacturing company after having suffered any damage by using their manufactured products.

  • Product Recall Insurance- There can be situations when a manufacturer is forced to recall their product after it has been released in the market for sale. The recall is due to two kinds of causes; voluntary and involuntary. Involuntary is when the manufacturing company is forced to recall its product; usually due to reasons such as Government orders and laws. Voluntary is when the manufacturing business recalls the product on its own for reasons such as, a defect in the product, the shipping charges being too high, etc. This insurance policy helps in reimbursing the costs of recalling the product and is usually purchased by manufacturing businesses that produce food and beverage and electronic products. Certain products do not come under the ambit of this insurance policy such as vehicles, tobacco and explosive materials.
  • Commercial General Liability InsuranceCommercial General Liability (CGL) Insurance covers the costs for the insured business if a third party faces any kind of bodily injury or property damage due to the activities of the business or by using its manufactured products or while visiting its office premises. CGL insurance provides compensation against legal claims such as judgment and settlement charges, court fees, lawyers fees and PR fees.
  • Property Insurance- Property Insurance is a broader insurance policy that has several covers under its ambit. It provides property protection coverage under which costs are reimbursed to the owner or a renter of a property if that property has suffered any damage due to theft or vandalism. This insurance policy also covers damages to the property due to natural disasters such as an outbreak of fire, hailstorm, lightning, etc. The insurance policy does not cover costs of damages due to a tsunami, floods, drainage and sewer related issues, etc.
  • Workers Compensation InsuranceThis insurance policy helps to bear the costs of medical expenses if a worker falls ill or is injured while working for his/ her business. The policy also compensates the income loss that the worker is likely to suffer during the period he/she is unable to report to work. If a worker is injured while at work regardless of who is guilty of that injury, the insurance can be claimed by the worker. In case, the worker dies while being at work, the insurance compensation will be paid to the dependents of the worker.
  • Factory Warehouse InsuranceThis insurance policy helps to cover the costs that a business suffers due to the destruction of its goods, raw materials and machines that have been stored whether in the premises of the business or outside. Under this policy both the costs of the damaged products, as well as the financial loss that a business suffers due to those damages, are reimbursed. Since a manufacturing business depends crucially upon raw materials to produce its finished products, this insurance policy would be of paramount importance to them.
  • Industrial All Risks Insurance- This insurance policy covers the costs of any accidental damage or loss to the property of a manufacturing business. The causes of that damage to those properties can be due to fire, vandalism, breakdown of the industrial machinery, etc. The policy benefits cannot be claimed if the damage to the property has been caused due to their erroneous design or if the machinery has broken down due to an interruption in power or water supply, if there have been faults such as cracks in the buildings where the property is housed.    
  • Business Interruption InsuranceThis insurance policy is used to compensate for the losses that a business suffers due to an interruption in its activities. The interruption could be due to natural causes such as the breakout of a fire or other natural calamities. This insurance policy cannot be purchased on its own by businesses and it is usually sold as an add on to other insurance policies such as property insurance. The business interruption period is counted by the insurance company from the day the business was struck by the disaster until the period when the business premises have been repaired and put back to its original condition.  
  • Cyber Risk Insurance– A number of manufacturing businesses are now making use of computer-operated machines, robotics and other technological tools that help in the process of manufacturing, inventory management, logistics, etc. These tech tools are at the risk of cyber attacks. Hence, manufacturing companies that employ these tech tools, which have a risk of cyber attacks, must have a cyber insurance policy.

The above mentioned types of insurance are crucial to manufacturing businesses, but are by no means a comprehensive list. There are several other types of insurance that manufacturing companies must consider. Among them are group health insurance, group accident insurance, fire and special perils insurance and more. If you would like to know more about insurance for your manufacturing business, get in touch with PlanCover.


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