Manufacturing businesses often run on tight deadlines and rely on expensive equipment. But with this line of work comes with certain risks, and if something does go wrong like a fire that destroys stock or machinery, the costs can quickly rise. That’s where insurance for manufacturers comes in, so when the unexpected does happen, you have the funds to resolve the damages and you don’t put your business at risk.
But what exactly is insurance for manufacturers, what does it cover and why do you need it? These questions are all answered in this blog from East Yorkshire Insurance Brokers. Let’s get into it.
What Is Insurance For Manufacturers?
Manufactures insurance includes the covers that you need to protect against the risks this industry is exposed to all in one policy. This insurance package is designed to cover your buildings, machinery, stock, liabilities and more. Talking to an insurance broker helps to tailor your policy to the way your business operates, so you’re not under or over insured and you’ve got the cover for the risks that you may be exposed to.
Why Do You Need Insurance For Manufacturing
If you run a manufacturing business, you will understand how one disruption in the production line can snowball into more problems down the line. If a fire damages stock or machinery, or your goods are lost in transit, you will be looking at high costs to replace damaged/lost goods and even downtime while repairs take place. Without appropriate manufacturing business insurance, you’ll be relying on your own cash reserves to replace stock, repair the building and keep wages paid, which can stack up to hundreds of thousands of pounds or more depending on how big your operation is. But having insurance gives you that peace of mind that if you do run into trouble, you’ve got that financial safety net so you can focus on getting your business back to running as normal.
The Different Types Of Manufacturers
There are three main types of manufacturing that all pose different levels of risks.
Made To Stock – MTS
Made to stock is when the manufacturing business makes products based on the demand forecasts, which are stored in inventory until the stock is sold. This means that you will often have large amounts of stock at a time, and a single incident like a fire, storm or theft could wipe out a large slice of your income in just one hit. Stock insurance for manufacturers is one of the most crucial covers you should consider if you run this type of business, so you’re not just covering your products, but you’re protecting your investment.
Made To Order – MTO
One of the other types of manufacturers is made to order, which means that goods are only produced after someone places an order for them. For these types of risks that threaten your deadlines and materials are some of the most concerning. A small fire in a single cell can derail a contract schedule; business interruption cover means you won’t lose out on income during downtime.
Made To Assemble – MTA
Made to assemble or sometimes called assemble to order is when manufactures make components in advance but won’t assemble them until an order is placed, leaning on just-in-time deliveries. But if one of the products you assemble happens to be faulty and causes injury or illness to customers, then you could be held liable. Product liability will cover the legal costs in this instance, so you’re not left with a huge bill.
What Does Insurance For Manufacturing Cover?
Manufacturing business insurance is a policy that covers the risks you’re exposed to when it comes to this line of work. Here are some of the covers that are included:
Stock Insurance For Manufacturers
Perils such as fire, flood, storm and theft can damage and wipe out a big chunk of your stock, which could be extremely expensive to replace. Stock insurance will cover the cost of the damaged stock so you’re not left with a huge dent in your income.
Buildings Insurance For Manufacturers
If the building that you operate out of becomes damaged whether that’s from a natural disaster or malicious damage, could drastically disrupt your business while you get the funds together to repair the damage. Building insurance will cover the cost of repairs, so you can get back to running your business as soon as possible.
Machinery And Equipment Cover
Manufacturing businesses use and rely heavily on expensive equipment from CNC machines to conveyor systems. If this equipment gets damaged it will cost a large amount to replace. Machinery and equipment cover will pay for the cost of replacing such machines if an incident occurs.
Business Interruption
Perils such as flooding doesn’t just cause costly damage, but it also leads to loss of income while you’re waiting for repairs to take place. Business interruption covers the cost of this loss of income during downtime so your business’ finances are protected.
Goods In Transit
If you distribute products and they get lost or damaged in transit, you will have to pay to replace these goods. Just last year, 85 million parcels were damaged during transport. If your goods become damaged during shipping, this cover will pay for the cost or replacing these items.
Product Liability Insurance For Manufacturers
If the products you make end up causing injury or property damage to a third party, you could be found liable. Product liability insurance covers the cost of medical expenses and legal costs in this situation.
Public Liability Insurance For Manufacturers
If a third party is injured on the property or because of the work you do, they could take you to court. Having public liability in place covers third party injury or property damage arising from your premises or activities.
Employers Liability Insurance For Manufacturers
Employers liability is a legal requirement in the UK if you have staff. This covers injury or illness, and covers the legal defence costs if an employee takes you to court as well as their medical bills if you’re found liable.
The Risks That Insurance For Manufacturers Covers
Fire and explosion
Manufacturing sites carry higher fire risks as they often have solvents, dust, paints, and electrics on site. Once a blaze starts the damage spreads fast. Buildings insurance pays for repairs while stock cover replaces raw materials and finished goods.
Flood, escape of water and storm
A burst pipe over a production cell or a damaged roof can drench lines and ruin inventory. Buildings insurance handles the repair of the premises, and stock cover takes care of materials and finished items.
Theft and malicious damage
A break-in means missing stock and often smashed doors, cages or shutters. Stock insurance responds to the loss itself, while buildings/contents cover repairs to the site. Most policies include minimum security requirements such as monitored alarms, lock grades and/or CCTV, so it’s worth checking you meet them.
Third-party incidents on site
Visitors, contractors and delivery drivers can be injured on your premises or their property can be damaged. Public liability covers the legal and compensation costs. Clear walkways, inductions and segregation between pedestrians and plant reduce incidents and help demonstrate you’ve managed the risk.
Transit loss
Parts and finished goods are rarely stationary. Shipments get dropped, soaked or go missing. Goods in transit covers loss and damage while items are on the move. Set the limit to your maximum load value and don’t rely on carriers’ low liability caps if the consignment is worth more.
Get In Touch With EYIB For Manufacturing Business Insurance
If you run a manufacturing business and need cover, East Yorkshire Insurance Brokers can help. We arrange manufacturing business insurance that fits how you actually work; factory floors, stock levels, supplier lead times, and everything in between. Whether you’re setting up a new line or reviewing an existing policy, we’ll explain your options in plain English and make sure the important bits (stock, machinery and liability) are set at the right levels. Don’t put your business at risk, get in touch with us today and we’ll help sort your manufacturing insurance policy today!
Manufacturers Insurance FAQs
What insurance does a manufacturer need?
Most manufacturers need a combined policy that includes buildings/contents, stock, business interruption, goods in transit, public and employers’ liability, plus product liability insurance for manufacturers.
Do we need goods in transit if carriers are liable?
Carrier liability is often limited by weight or set terms and may not match your item values. Your own cover ensures you can recover the full value quickly without chasing multiple parties.
Do I need insurance as a start up manufacturer?
Yes, even small manufacturing businesses are exposed to risks, getting the right policy in place ensures that you are covered if anything goes wrong.
What does manufacturer insurance cover?
Most policies include at least £2 million public and products liability, plus £10 million employers’ liability as standard.
