It’s one thing to know that you need insurance to keep your business safe, and it’s another to know what the coverages are and how they serve you. Manufacturer insurance is like a production line: there are multiple pieces and moving parts, but everything comes together to form a final product. There are lots of different coverages you can mix and match to build the perfect plan for your business. It can be tough to know which ones are right for you.
Here’s how you can use a customized manufacturing insurance policy to strengthen your business’s risk management strategy.
Protecting Your Products
Product Liability Insurance
Product Liability Insurance provides coverage for bodily injury or property damage caused by products, parts, and ingredients you manufacture and supply.
The products you make have the potential to cause injuries or damages to those who use them. From a curling iron catching fire to a candy necklace causing choking, there are thousands of ways an accident may occur.
Having to pay for legal fees, medical bills, repair costs, and more can be costly. That’s where product liability insurance helps you out. It’s designed to cover the cost of a product-related claim so you don’t have to shoulder the expenses on your own.
Here are some examples of claims product liability insurance may cover:
- Property damage (such as fires, floods, discoloration, scuffs, & scratches)
- Mislabeling & manufacturing defects (such as missing or incorrect labels, warnings, and instructions)
- Injuries (such as burns, fractures, allergic reactions, cuts, & bruises)
- Illnesses & infections (including viruses, bacteria, fungi, parasites, & foodborne germs)
- Accidental death or dismemberment (including paralyzation)
It’s possible that you only produce parts of a product, handle the packaging, or manage assembly; you might not be responsible for every part of the manufacturing process. You also likely use other businesses and vendors to get the product from your facilities to store shelves; there’s a chance your product might be damaged or mishandled by someone else, leading to an accident later on.
You can still be named in a lawsuit or be held liable by a customer simply because your business played a role in creating the product. While you may be able to defend your business against these claims, it still takes time and money to do so.
Product insurance could help pay for or eliminate the cost of a claim so you can keep your operations running as smoothly as possible while ensuring your customers are cared for.
Product Recall Insurance
Product Recall Insurance provides coverage for the cost of removing products from the market in the case of a product recall.
Imagine mailing out wedding invitations with the wrong date and venue printed on them. It would be a big undertaking to have to notify each recipient about the mistake and give them the right information. Now multiply that by 10 and you probably have what is equal to the stress of a product recall.
Having to issue a recall is something no manufacturer wants to do, but is likely to happen at least once in your career. It may be caused by a contaminated ingredient, a design defect, or a faulty part. Whatever the reason, it would involve notifying retailers, informing customers, and making a plan to retrieve the affected product.
Product recall insurance is designed to help you cover these costs, and more. It could pay for:
- Issuing notices
- Shipping expenses
- Product disposal
- Customer communications
This type of insurance typically does not pay for the cost of refunds, lost revenue, product testing, or brand repair efforts. You do have some responsibility as a manufacturer to place safe products on the market, so you’ll likely still have to pay for a portion of the product recall expenses.
Frequently testing your products and having a recall plan in place can make your chances of a recall smaller and make it easier to handle one if it does occur.
Protecting Your Business
General Liability Insurance
General liability insurance provides coverage for bodily injury or property damage caused by your business and/or its operations.
An unsecured wire could lead to a broken hip. An unsupervised machine could lead to damages in a rented facility. A new packaging design could lead to a copyright lawsuit. General liability insurance covers a wide variety of claims that could come from negligence accidentally caused by your business.
For example, general liability could help you cover:
- Medical bills from a visitor tripping on a chord while touring your facility
- Repair costs from your machinery damaging the floors of a building you rent
- Compensation for a photographer claiming you used their images on your packaging without their permission
- Lost wages for people who fell ill and were unable to work because of contaminated waste your company improperly disposed of
- Legal fees from a competitor suing you for false information you mistakenly published about them online
Running a business naturally carries risks that you have to be prepared to face if something goes wrong. General liability insurance does a pretty good job of covering you for those random accidents you never thought would happen.
What if a family of rare birds nesting nearby dies from the excess steam your manufacturing plant outputs? What if a few of your investors come to check in on things and a machine malfunctions and sprays a permanent dye onto their expensive clothes? What if an expo invites your business to be an exhibitor at an event, but your display falls over and damages the stuff in the booth next to you?
These scenarios, and more, could be covered by general liability insurance. If there’s one policy you absolutely need, it’s going to be this one. Fortunately for you, it’s often combined with product liability to form one easy-to-manage insurance plan.
Cyber Liability Insurance
Cyber liability insurance provides coverage for online attacks, scams, and crimes against your business.
Manufacturing businesses rely heavily on digital forms of communication to keep track of orders, production, and transportation details. If this information was to fall into the wrong hands, your business could be the target of a major crime.
Cyber liability insurance is designed to help your business pay for losses caused by a cyber attack. This could be from phishing, malware, or ransomware intended to hijack and halt your business through a cyber crime.
This coverage could help you pay for:
- Recovering stolen funds
- Retrieving stolen data
- Notifying customers of a breach
- Ransoms for stolen information
- Lawsuits from customers affected by an attack
Cyber liability does not prevent attacks from happening, rather it helps pay for the aftermath of an attack. It’s important to invest in strong cyber security and routinely update your systems so you can lower your chances of cyber crime. If you have employees, it’s always a good idea to train them in cyber safety so they are not the target of an attack on your business.
Professional Liability Insurance
Professional liability insurance provides coverage for bodily injury or property damage caused by professional advice provided by your business. Coverage for third-party financial losses due to negligent services or violated agreements. Also known as Errors & Omissions Insurance (E&O).
Most products come with instructions, directions, or demo videos that customers can rely on to know how to use a product safely. If these guidelines lead to customer injuries or damages, you are responsible for the cost of these calamities — unless you have the right insurance coverage.
Professional liability insurance is designed to help you pay for accidents caused by professional advice your business provides. This could be something you said in a live video on social media while answering a customer’s question, or misinformation you printed in a user manual that accompanies your product.
Professional liability could also cover failures to meet contractual obligations or manufacturing errors that result in a third-party financial loss. This means someone was not hurt or property was not damaged, but an error on your end causes another business you’re partnered with to lose out on revenue.
For example: Your business manufactures rubber hoses used in cars, and an engine manufacturer has contracted you to provide them with hoses. A production defect goes unnoticed and you deliver faulty hoses to the engine manufacturer. The defect brings a halt to their production until you can fix the error and send new, undamaged hoses. This delay causes them to miss an important deadline and they lose a big brand deal. The engine manufacturer is now suing you for negligence and financial loss.
This type of error is not covered by general or product liability, so it’s important to bridge that gap with professional liability insurance.
Protecting Your Assets
Inland Marine Insurance
Inland marine insurance provides coverage for your inventory, supplies, and equipment while in transit on land or being stored at your facilities. It’s also known as Property in Transit Insurance.
You need certain equipment for your business to effectively run, and you need your products for your business to make a profit. Without these things, you’d be out of business. If only there was a way to insure this kind of stuff…
You’re in luck, there is! Inland Marine insurance is designed to insure the items you need to operate your business. It could help you pay for the cost to repair or replace an item that is damaged or stolen while in transit or at your place of business. Phew, that was a lot of the word “or” in one sentence…
Some examples of insurable items include:
- Product inventory
- Manufacturing equipment
- A tablet used for business purposes
- Filming gear used for demo videos
- A camera used for product photos
- Shipping and packaging supplies
If it’s a moveable piece of business property, then chances are it could be insured.
You might be taking some product samples to a wholesaler when you stop to grab lunch. Someone breaks into your car and steals your work laptop and most of your samples. If these items were insured under your policy, you could be covered for the cost to replace them.
Maybe you’re expanding your business so you’re in the process of getting new equipment set up in a new building. Someone accidentally leaves a door unlocked and you walk in the next day to your equipment missing some of its parts. You’ll need to order replacements before you can get operations started. If your equipment is insured, you could have help paying for the replacement parts.
Inland Marine is not meant to insure buildings, vehicles, or trailers. It also cannot cover you for theft or damages caused by you or an employee. If your products are stolen, this coverage may cover the cost of supplies to remake the products, but not the market value of the products.
It’s important to always secure your buildings to best protect the contents inside. Investing in a security system may help you scare off intruders or better gather evidence of a crime for a claim.
Hired/Non-Owned Auto Coverage
Hired/non-owned auto coverage provides coverage for rented, leased, or borrowed vehicles used for business purposes.
It’s pretty common for a manufacturing business to use vehicles to complete daily operations. You typically have your main office located in one building and your manufacturing plant located in another, so you’ll need a way to frequently travel between them. You might also have trucks taking products from the plant to a warehouse for storage and shipment. What are you going to do if one of those trucks you’re leasing is involved in a car accident?
Hired/Non-owned auto coverage is designed to cover injuries or damages caused by an accident involving one of your business vehicles. Some examples of this include:
- You are trying to navigate a rented work car through a busy intersection when you accidentally hit a pedestrian and they require medical care
- An employee driving a leased work truck loses control and crashes into the side of a local business, damaging their building and some cars in the parking lot
- An employee driving their own vehicle for business purposes and they accidentally rear end another car (note that this coverage will work to cover what the employee’s personal auto insurance will not cover)
This coverage may help you pay for medical care for someone else, damage done to someone’s property, or legal expenses if your business is sued for negligence.
It will not pay for damage done to your rented, leased, or borrowed business vehicles or personal vehicles. It also will not cover injuries caused to you or an employee during an accident. If a hired or non-owned business vehicle is being used for personal reasons and is involved in an accident, this coverage will not apply to those claims.
Typically your personal auto insurance (and your employee’s auto insurance) won’t cover claims that are related to business activities, so it’s important to have the right coverage in place to keep your business safe on the road.
Additional Insureds
You might also be required to have additional insureds, which provides coverage for other parties or entities that may be affected by a claim caused by your business, your operations, or your product.
If you’ve ever had a sibling blame you for something you were not involved in, and you both were punished for it, you were likely upset that you had to get in trouble for no reason. This still happens in the adult world, it just involves lawsuits and multiple parties.
Let’s say you just got your new skincare product into a retail store. You sent them their product order and the floor display for it. However, you forgot to include a small sign that warns about tree moss extract being an ingredient. Now you’ve got a group of customers who suffered from allergic reactions after sampling the product and they are now suing both you and the store owners.
The store owners are not the ones who forgot to display the small sign, but they are now being faced with attorney costs and customers’ medical bills. You could help cover these costs for them if they are an additional insured on your policy.
Additional Insureds (AIs) are other businesses or entities who are named on your policy and can receive coverage for claims caused by your negligence. AIs are typically:
- Distributors
- Retailers and wholesalers
- Property managers
- Trade shows and events
- A city or county
An AI is not employees, friends or family, other businesses you own, or yourself.
You are typically asked to add an AI to a policy when you are entering into a contract agreement or partnership. This is because the other party wants to be safe when doing business with you. If you happen to work with independent contractors, you can ask that they add you as an additional insured so you are not responsible for accidents they cause when working with you.
Protecting Your Employees
Workers’ Compensation
Workers’ compensation provides coverage for illnesses or injuries your employee(s) may sustain while on the job.
Accidents don’t just happen to people outside of your business, they can happen to the people within your business too. Your employees may be operating heavy machinery, exposed to dangerous chemicals, or step in an un-mopped puddle on the floor.
Worker’s Compensation (also called Workers’ Comp) is designed to help you pay for expenses for an employee’s work-related injury, illness, or death; such as:
- Medical bills
- Lost wages
- Disability pay
- Injury rehabilitation
- Physical therapy
- Funeral expenses
- Survivor benefits
- Litigation costs
We know the majority of you are not trying to be purposefully neglectful to your employees, which is why we believe in offering a no-fault workers’ comp coverage. This means the amount paid out for a claim is not increased or decreased based on carelessness.
We won’t say, “Well, you could have offered better safety training so we’re only going to pay half of your claim.” Instead, we will look at the claim as a list of costs and not as a list of things you or an employee could have done better. The accident has already happened, so it’s more important to focus on repairing the situation and caring for your employees.
There are some instances where workers’ compensation won’t cover you. This can include (but is not limited to) incidents that occur during a commute, intentional injuries, claims after termination, and coverage for independent contractors.
The most common manufacturing workers’ comp claims we see involve strains and sprains related to heavy lifting. One way manufacturers address this is by teaching their employees some easy stretches they can try to prevent injuries.
Employee Benefits Liability
Employee benefits liability provides coverage for errors or omissions that occur while administering benefit plans to your employee(s).
Onboarding new employees or updating benefit plans can be a big undertaking. If an employee was not correctly added to a group plan, or was not fully informed about all of their benefits, you could have a lawsuit on your hands.
Employee benefits liability helps you pay for errors related to your employee benefit plans. This may include:
- Medical bills accrued by an employee who was misinformed about their plan
- Legal fees from employees suing over your failure to provide promised benefits
- Backdated retirement funds for an employee who was not properly enrolled by you
- Issuing refunds for inaccurate premiums employees paid
Your employees help your business function, so it’s important to ensure they are taken care of. Routinely review your benefit programs and keep accurate records of all enrollments, coverages, and plan changes. Also be sure your onboarding plans are up-to-date and that you are regularly informing your staff about benefit programs.
Get Covered With Insurance Canopy
We’re Insurance Canopy, your friendly neighborhood insurance folks. We’ve made it our mission to assist you in finding affordable insurance and understanding how it works. (We’re also one of the most trusted industry leaders who help thousands of businesses get their products sold by big name stores each year, but we don’t like to brag!)
From suppliers to shipment to store shelves, your manufacturing business is exposed to thousands of risks each day. It’s vital you build a shield of safety around your products, your business, your assets, and your employees so if something goes wrong, you are prepared to respond with the financial support of insurance.
Insurance Canopy offers customized coverage and one-on-one support to manufacturers who want to insure their business or need to meet contract requirements. Applying for a quote is free and easy; you can submit an application online in minutes and receive an estimate within one business day. Our team is always here to assist you and help you find the right policy — even if it’s not with us.
Whatever your reasons for getting coverage, we hope you come to us the next time you’re considering manufacturer insurance. Let’s build something great together!
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