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Manufacturers Insurance - What Every Small Business Needs to Know

Operating a business that manufactures products can place added responsibilities on owners — including the need for more insurance.
Along with standard business liability coverage, are you considering manufacturers insurance for your small business this year? If so, you should understand what this type of insurance actually covers and how to choose the right level of coverage for your small business.

What Is Insurance for Manufacturers?

In the manufacturing world, the ability to produce high-quality goods efficiently and quickly is paramount. In order to prevent material shortages, manufacturers have to plan ahead. Unfortunately, it's common for production plans to be impacted when a supplier fails to deliver raw materials on time, products get damaged (or lost) in transit or manufacturing equipment breaks down. This, of course, can set production and customer orders back.
Manufacturers insurance provides assurance that the business can continue to operate even when facing setbacks, and that there will be a way to secure much-needed cash flow to cover business expenses.

What Factors Determine If Manufacturing Insurance Is Needed?

As the National Association of Manufacturers notes, "In 2015, there were 251,774 firms in the manufacturing sector, with all but 3,813 firms considered to be small (i.e., having fewer than 500 employees). In fact, three-quarters of these firms have fewer than 20 employees." Many of these small — and startup — manufacturing businesses contribute more than $2 trillion to the economy (as of 2016 figures). However, they typically take on the highest cost per employee and often don't get the same discounts from vendors as larger firms.
A small business involved in manufacturing operates on a very thin budget, which makes it the perfect candidate for manufacturing insurance. Often, small manufacturing firms rent the physical space they operate within, but the rental insurance doesn't cover the potential loss of equipment, tools and supplies used in operations. The risks associated with materials management, hiring workers and promising delivery of goods to customers puts manufacturers in a position where if something goes wrong, there is little to fall back on.

Coverage Options Available

Connecting with an insurance firm that provides quality manufacturing insurance is the first step toward obtaining the right coverage. There are multiple considerations unique to the business, which should be discussed with an experienced agent.
For example, does the business own most of its equipment, or rent it? Does the organization have other types of insurance that can be combined with a more affordable manufacturers insurance product? Does the coverage extend to factors like orders in transit, supplies stored off-site by sales representatives and cost fluctuations in the value of materials as well as finished products? All of these factors should be considered in order to find the best coverage.
The basic types of coverage offered by manufacturers insurance include:

  • Business General Liability — Covers the business in the event that a visitor to the company gets injured or is killed, or an employee visiting a customer's property damages it.
  • Workers' Compensation — Covers work-related injury or illness sustained by employees. The insurance generally covers the cost of medical care, legal needs and lost income.
  • Commercial Property — Covers the property and materials owned by the company from loss or catastrophic damage caused by theft, natural disasters and more. This is a good option for any business renting space or equipment.
  • Inland Marine — If goods are to be shipped across continents, this can be a good option for small manufacturers. It provides insurance for goods not covered by the shipping company.
  • Fleet Insurance — When a company operates vehicles for transport of manufactured goods or sales efforts, it's vital to have vehicle insurance coverage that is cost effective.

These are just a few of the options available to small manufacturing businesses. The coverage can help business owners rest assured that their property and profits are protected at all times.