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A successful manufacturing company requires mastering machining, welding, and fabrication. It also requires proper insurance to protect its business assets from unforeseen risks.
Manufacturing and selling machine components come with substantial exposures that could impact your facilities, equipment and machinery, inventory, finances, and legal liability. Carrying tailored insurance helps safeguard your company against potential losses that could disrupt operations and revenue.
This article examines crucial insurance products machine part manufacturers need, including property, liability, equipment breakdown, workers compensation insurance, commercial auto, and umbrella insurance.
Let’s explore how an experienced manufacturing insurance company can help craft a business insurance solution specific to your manufacturing operation and exposures.
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Table of Contents
Introduction to Manufacturers Insurance for Machine Parts Companies
The machine parts manufacturing industry significantly contributes to the American economy, producing over $33 billion in shipments annually. Companies in this sector create essential components that keep factories running, vehicles driving, and critical infrastructure operating.
As a machine parts manufacturer, you design, fabricate, and sell metal components integrated into larger equipment and end products. Maintaining a successful operation requires managing risks from fires, supply chain problems, lawsuits, workplace injuries, and equipment failures that could suspend production.
Properly insuring your facilities, machinery, inventory, liability exposures, vehicles, and employees provides financial protection against these perils. This allows you to focus time and energy on fabricating quality components, streamlining production, and growing your business.
This article outlines crucial insurance that machine part manufacturers need to protect their assets and operations and reduce the risk of loss from potential liability claims.
Specific coverage needs of manufacturers include:
– Property insurance
– General liability insurance
– Equipment breakdown insurance
– Product liability insurance
– Commercial auto insurance
– Workers’ compensation
– Umbrella liability
– Business interruption insurance
– Errors and omissions insurance
– Cyber liability insurance
Property Insurance Safeguards Your Buildings and Equipment
Your commercial property faces constant risk of damage from fire, severe weather, vandalism, and theft. These perils could destroy your buildings, equipment, component inventory, and vital business records. The financial toll of repairing, replacing, and restarting operations could significantly impact your bottom line or even threaten the survival of your company.
A commercial property insurance policy pays to rebuild, repair, or replace your physical assets after a covered loss.
Key coverages include:
– Building coverage – Pays to reconstruct or repair your facility after damage from fire, wind, hail, and winter storms.
– Business personal property – Covers damage to equipment, computers, inventory, supplies, furniture, and other contents.
– Business income coverage – Reimburses you for lost income if your business is shut down after a property loss. This important insurance helps your business by paying ongoing expenses until you reopen.
– Equipment breakdown insurance – It is the expense coverage to protect your business if the equipment damaged by electrical arcing, motor burnout, boiler explosion, or other mechanical breakdowns needs repair or replacement.
Having adequate limits ensures your business can bounce back after a catastrophe strikes. Get a quote from an experienced insurance broker who understands the unique risks posed to your business and can help you determine appropriate limits.
General Liability Insurance Protects From Lawsuits
Manufacturing machinery parts exposes you to substantial liability claims if someone is injured on your premises or harmed by your products. it is designed to protect against the unique risks posed to your business. Slip and fall accidents, malfunctioning machine parts, or faulty end products could all lead to costly lawsuits against your business.
General liability coverage helps you protect your company’s finances if you are sued and found legally responsible for property damage or injury. This essential policy pays for legal defense costs and damages awarded up to your coverage limits.
Key coverage options include:
- Premises liability – Covers injuries from slips, trips, and falls, or other dangerous conditions on your property.
- Products liability – Provides coverage to help protect your company if a flaw in your manufactured components causes damage or bodily injury to the end customer.
- Personal and advertising injury – Protects against claims arising from copyright violation, libel, or other personal/advertising injury claims.
Your insurance broker can guide on recommended liability limits based on your operations and assets you wish to protect from lawsuits. Check with the insurer what is available and what may not be available with a specific policy.
Equipment Breakdown Coverage Safeguards Your Machinery
Advanced equipment is the backbone of your manufacturing operation to fabricate quality components efficiently. However, unexpected breakdowns of machines like welding robots, CNC mills, hydraulic presses, and other equipment could suspend production and require costly repairs or replacement.
Equipment breakdown insurance (sometimes called boiler and machinery insurance) pays for damage when electrical arcing, mechanical failure, or operational errors cause machines to malfunction or break down. It covers repair/replacement costs for damaged equipment plus loss of income until your facility is back up and running.
This insurance for your business is essential to keep your manufacturing operation online and avoid expensive equipment replacements during catastrophic malfunctions.
Protect your heavy machines against sudden breakdowns with equipment breakdown insurance.
Product Liability Insurance Covers Defective Products
For machine parts manufacturers, one of the most significant financial threats is a lawsuit involving one of your defective components, causing downstream damage or bodily injury. These liability claims can seek substantial damages given the technical complexity of your products and level of human harm defective components may potentially cause.
While your general liability policy provides some coverage against faulty product claims, it’s smart to purchase dedicated product liability insurance.
This business insurance coverage protects against financial loss when your merchandise causes damage or bodily injury after leaving your facility.
Enhancements may include:
– Ability to purchase higher liability limits to protect your business assets and net worth.
– Protection for expenses incurred on defective products for which you issue a product recall.
– Potential inclusion of errors and omissions insurance for losses caused by faulty designs and planning.
Consult with an insurance professional to discuss your liability risks and options to transfer this severe threat through proper insurance. Don’t take chances with gaps in insurance for your manufactured goods.
Commercial Auto Insurance Protects Your Vehicles and Drivers
Your business relies on motor vehicles to pick up raw materials from vendors, transfer components between buildings, make deliveries to customers, and accomplish other business transportation needs.
Commercial auto insurance provides essential protection for your vehicle fleet by covering third-party injury/damage if your employees cause an accident while driving for work purposes. It also pays to repair your own vehicles after a collision.
Standard coverages include:
- Liability – Covers bodily injury and property damage to others when your drivers cause an accident. Having sufficient limits prevents your personal and business assets from being exposed in a severe auto accident
- Collision – Repairs damage to your vehicles after an accident
- Comprehensive – Pays for losses from causes other than a collision, such as fire, theft, or hail damage
- Medical payments or personal injury protection – Provides coverage for medical costs to your drivers if injured in an accident
inadequate or no commercial insurance for manufacturers puts you at a high risk of liability and vehicle repair costs.
Workers’ Compensation Insurance Is Compulsory
Given the hands-on nature of parts fabrication and machine operation, workplace accidents and injuries are an unfortunate possibility. Cuts, loss of limb, burns, head injuries, and other claims could happen if proper protocols and guards are not followed.
In most states, carrying workers compensation insurance is legally required. This essential coverage pays for an injured employee’s medical treatment, lost wages while recovering, and long-term support if the injury causes permanent disability.
When workplace accidents happen, workers comp takes the liability burden off your shoulders so you can focus on helping employees get back on their feet.
Key features include:
– Meeting state statutes for carrying workers compensation insurance.
– Sufficient limits to care for injured workers based on your payroll and operations.
– Built-in policy features to control claim costs.
In addition to fulfilling legal requirements, workers’ comp protects your finances from being depleted by high-cost employee injury claims.
Umbrella Liability Insurance For Added Protection
Despite your best risk management, a serious liability claim could potentially exceed the limits of your general liability or auto policy. Without additional coverage, your business assets and even personal assets could be seized.
Umbrella liability insurance provides a second layer of protection that kicks in when claims hit the limits of underlying policies. It provides additional coverage – usually $1 million to $10 million in extra limits – to pay liability expenses not covered by primary policies.
Higher total limits prevent you from paying judgments or settlements out-of-pocket after a catastrophic claim. For manufacturers, this extra protection provides invaluable peace of mind.
Business Interruption Insurance Protects Income
A fire, storm, equipment breakdown, or other disruption could suspend business operations and prevent you from fulfilling orders. The financial impact of lost income could be severe.
Business interruption insurance provides vital protection by covering income lost due to suspended operations from a covered peril. It also pays extra expenses to keep the business running on a limited scale during restoration.
Don’t overlook this valuable coverage – make sure your policy includes sufficient interruption limits tailored to your unique operations and revenue streams.
A machine shop owner may also consider investing in Employment Practices Liability Insurance as a safeguard against potential claims from an employee of harassment, wrongful termination, or discrimination.
Cyber Liability Insurance Handles Data Breaches
In today’s digital world, machine parts manufacturers rely heavily on computer networks, online controls, and data storage. A data breach, computer virus, or cyber attack could result in costly system repairs and lost income.
Cyber liability insurance covers expenses if private data like customer credit cards or employee records are compromised.
It pays costs to notify those impacted, restore and rebuild computer systems, defend potential lawsuits by data breach victims, and handle PR to help with your business continuity and restore your company’s reputation.
Given increasing cyber risks, this specialized insurance for machine shops can help cover risks posed to manufacturers relying on integrated technology and data storage.
Errors and Omissions Insurance Protects Planning Exposure
Many machine parts are custom fabricated to client specifications and strict engineering requirements. If flaws in your initial design, planning, or documentation result in faulty end products, substantial financial liabilities could follow.
Errors and omissions (E&O) liability insurance covers financial loss due to professional mistakes in your drawings, calculations, designs, and other technical work that gets integrated into a client’s finished project. It protects you when errors on your part result in problems down the road.
For machine parts fabricators, E&O coverage adds an essential layer of protection on top of your commercial general liability insurance policy.
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Find an Agent With Risk Management & Manufacturing Insurance Expertise
As a machine parts manufacturer, it’s crucial to work with an independent commercial insurance agency that deeply understands your business needs and potential risks and exposures.
They can provide both general manufacturing knowledge and niche expertise in the machine fabrication sector.
Look for an agency that has:
– Specialization in manufacturing, including familiarity with machine part exposures. This translates to tailored recommendations rather than generic policies.
– Established relationships with multiple insurance carriers. With access to different underwriters, they can shop your coverage for optimal pricing and value.
– A track record of long-term support before and after the sale. You want an advisor invested in your ongoing risk management rather than just a quick transaction.
The right business insurance partner brings industry knowledge and the ability to shop multiple carriers for specialized manufacturer insurance. With coverage fine-tuned for your operation, you can manufacture high-quality components with confidence.
Getting The Right Insurance For Machine Parts Manufacturers
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For business owners researching insurance options, you likely still have some questions about protecting your manufacturing operation. Below are answers to some frequently asked questions:
A typical manufacturing business insurance program includes property coverage, general liability, equipment breakdown, product liability, automobile, workers comp, umbrella, business interruption, cyber liability, and errors & omissions.
An insurance expert can help determine if additional niche policies may be warranted based on your operations.
Manufacturing insurance costs vary based on the risks a business faces.
It also takes into consideration the business location, safety record, machinery values, revenue, claims history, and other factors.
On average, total annual insurance costs for machine parts manufacturers range from approximately $25,000 to $250,000+.
There is no general legal requirement to carry product liability insurance.
However, given the substantial financial risk of defective machine components, this coverage is strongly recommended to protect manufacturers from potential lawsuits.
Business income insurance is designed to safeguard a business from lost income due to a property damage claim.
General liability coverage provides protection for your business from financial harm when customers, vendors, or other third parties are injured on your property or impacted by aspects of your operations and products.
It covers legal expenses and settlements up to your selected limits.
While property insurance may pay for some equipment damage, specialized coverage for the breakdown of equipment like boilers and machinery provides enhanced protection, covering the loss from electrical arcing, motor burnout, operator errors, and other equipment malfunctions.
This valuable coverage pays for repairs and income loss when machinery is down to protect your company.
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Protect Your Small Business With Machine Shop Insurance Policies
Operating a successful machine parts manufacturing company requires managing a spectrum of risks, from fire damage to equipment failures to product defects that could cause severe injury. That’s why it’s crucial for you to invest in business insurance.
Proper manufacturer insurance can help create a financial safety net, allowing you to withstand unforeseen losses and continue servicing customers.
Work with an experienced manufacturing insurance agency to perform a risk assessment of your operations. A knowledgeable insurance agent can craft a tailored insurance solution, including key coverages like property, liability, equipment breakdown, automobile insurance, workers’ compensation, and umbrella insurance.
The right insurance package defends your equipment investments, reduces the threat of product liability, and provides funds to repair and reopen after a disruption.
If you want the best insurance company that understands your unique needs and risks, The Allen Thomas Group offers a plethora of insurance options to protect your machine shop owner business.
We offer reliable guidance so you can continue your business operations unhindered without worrying about unique risks and liabilities that surface from your specific business type.
The insurance landscape is more complex than ever.
Give us a call at The Allen Thomas Group, and we can provide specific insurance for manufacturers with a plethora of coverages and services.
Let us help you get back to business with the right manufacturer insurance policy options.