You make things for a living. Specialized equipment is at the heart of your operation, and you count on clear processes and detail-oriented employees to keep your business running smoothly. When things are good, they’re great; when one part falls out of place, your business can go downhill quickly.
So, what sort of insurance coverage will your manufacturing business need to help it rebound and recover? Think about the following common problems that can plague manufacturers (whether you work with paper, produce, or patterns) and consider how and when these specific manufacturing insurance coverages may help you avoid some costly consequences.
Mistakes can happen…be ready for them
You do great work, but you’re only human. Sometimes details get overlooked, decisions are made in haste, and problems arise in production. Instead of relying on perfection, you may want to protect against any slip-ups that could land you with a big bill.
1. Errors and Omissions (E&O)
E&O coverage will differ according to your industry. For commercial printers, it can cover the financial loss that results from a series of misprinted signs, or a design error on a prominent billboard. Whether your client is a major advertising agency or a local small business, fixing the problem can take a lot of time and energy – and you could be on the line for the ad space rental and the reprinting costs.
When you make a component that will become part of a complex system, an error or omission in your product can render the finished item useless. A bike handle that doesn’t fit on the body, a gear that doesn’t align with the others, or a lever that’s not angled properly could be enough to ruin the machine.
Since the part you manufactured hasn’t caused any actual damage to the final product or client, your CGL policy wouldn’t cover the loss – but Manufacturers’ Errors and Omission coverage can help. If a third party suffers a financial loss as a result to your manufacturing error, E&O can cover some of the cost that falls on you.
2. Negative Publicity
What comes after a major manufacturing mistake? In many cases, a wave of negative publicity. And while some people insist that negative publicity is just as valuable as positive press, a story about poor employee conduct or product contamination can certainly leave a sour taste in your customers’ mouths.
If an employee who works closely with raw product – say, bread dough – is diagnosed with an infectious disease and the media hears about it, you could begin to lose customers. Likewise, if a contaminated product made it onto the shelves, customers could begin to get sick, and that can have a major impact on your brand value. In order to avoid this fate, it’s a good idea to include Negative Publicity coverage in your policy, which would help cover your loss of income if an incident were to damage your food and beverage manufacturing company’s reputation.
Protect yourself when trouble arises offsite
You might have safety and organization down to a science in your workspace, but what about when your equipment, employees or products are offsite? Your commercial property insurance won’t follow you wherever your business goes – you may need something more specific when you’re out and about.
3. Motor Truck Cargo
Whether you work in the food and beverage industry or concrete and cement production, extra risks pop up when a business depends on its company vehicles. A breakdown, traffic accident, or unloading incident can derail your operations, and cargo theft is more common than you may think.
Fortunately, you can prepare for the worst when you take your business on the road. Motor Truck Cargo insurance coverage can make up for lost revenue in the event that your truck rolls over and spills its contents, or if the refrigeration unit in your vehicle breaks down and leaves you with a lot of spoiled product. It can also cover losses that come with loading and unloading the vehicle.
4. Installation Floater
When you’re in charge of installing your product as well as manufacturing it, you might find yourself working in unfamiliar spaces – and facing unexpected risks. Everything from theft to fire can interrupt your job, whether you’re on the way to the site, in the process of installing the item, or keeping the product at a temporary storage location.
Many insurance policies only cover your operations when they’re carried out on your property, so when installation is a major part of your job, you may want to consider coverage known as Installation Floater. This coverage protects against losses caused by common installation hazards, either en route or at the install location.
Your commercial property insurance won’t follow you wherever your business goes – you may need something more specific when you’re out and about.
5. Moulds and Patterns
Moulds, patterns, dies, and forms are expensive tools, and when a customer trusts you with these pieces, you’re responsible for them – no matter where or who they go to next.
For instance, it’s not uncommon for auto part makers to subcontract some work out to a smaller manufacturer, which means sending them the client’s patterns and forms. If a fire or any other event damaged these pieces of equipment while they were out of your hands, Moulds and Patterns coverage would help cover the costs associated with the loss or damage, whether the forms belong to you or to your client.
You can’t control everything (but you can recover from setbacks)
Sometimes it can seem like nothing’s going your way. Broken machinery, a computer virus, or a power failure could strike out of the blue, bringing your manufacturing business to a standstill. While you can’t prevent these frustrating events, you can be ready to handle them with minimal stress and less out-of-pocket expense.
6. Equipment Breakdown
When you manufacture products, you depend on your equipment. Breakdowns aren’t just annoying, they can be paralysing.
All it takes is a power surge to rip through an electrical transformer and put your printing press out of commission for days (the same goes for other specialized machinery and equipment). Your Property coverage is important, but it wouldn’t help you here – it stops short of accidental equipment breakdown. Instead, you would need Equipment Breakdown coverage, endorsed with Production Machinery to help cover the cost of repairs, replacement, and loss of business income until your machine is up and running again.
When you manufacture products, you depend on your equipment. Breakdowns aren’t just annoying, they can be paralysing.
7. Cyber Risk
Whether you work with paper or food, metal parts or concrete, cyber risk is nearly universal. Business operations are going digital, and even if you use a fairly simple computer system, your company could be more vulnerable to hackers, viruses, and cyber espionage than you might imagine.
Consider this: you rely on data to operate your CAD (Computer Assisted Design) software, but malware has infected your system, and you can’t access the tools and data you need to conduct business. How do you proceed? Your business might be sidelined until your corrupted data is restored, but if you have Cyber Risk protection, you can count on coverage to help unlock your data and cover the costs associated with privacy breaches, internet media liability, and income lost during the shutdown.
Remember, you can’t stop the rain, but you can carry the best umbrella. Take a closer look at what we can offer you, and if you’re ready to update your manufacturing insurance coverage to align with the risks your business faces every day, request a quote from Northbridge today!
