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What Insurance Agents Need to Know about Manufacturing Risk

Planning for Disaster Is Essential

of business hit by a disaster never reopen

That number, reported by FEMA, should strike terror in the hearts of small-business owners everywhere, but it probably doesn’t. Most people don’t expect tragedy to visit them. Unfortunately, disasters don't have to be Superstorm Sandy-sized to do major property damage. And for manufacturers that rely on suppliers from all over the country or world, misfortunes don't even have to be in their backyard to cause business disruptions. Take heart, though: if you’re one of the 62 percent of small businesses that doesn’t have a formal disaster response plan, you can create one to boost your odds of surviving no matter what hits.

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Important Insurance Policies for Manufacturers

Whatever product your client manufactures, they likely depend on a wealth of assets - equipment, inventory, and supplies - to keep their business running. They probably have commercial space to store these items and employees to manage operations. Not to mention, manufacturers could be liable for damages their products cause customers. This combination of risks is unique to the manufacturing industry. Each exposure needs a different policy to provide appropriate protection.

While manufacturers depend on people and equipment to produce their goods, they only have a smidgen of control over what happens to any of it. As a result, they need a strong risk management plan to prepare for the unexpected. Here are a few policies your client should consider:

General Liability Insurance

Your client's warehouse or factory is rife with hazards, especially for people who are unfamiliar with its procedures. It's important for your client to protect their assets in the event someone visits their facilities (e.g., a business partner) and sues for bodily injury or property damage. When that happens, General Liability Insurance can pay for your client's legal fees or replacing the third party's property. Your manufacturing clients will also want to add Products Liability Insurance to their GL policy. This coverage addresses third-party lawsuits that claim your client's products caused bodily harm.

Property Insurance / Business Owner's Policy (BOP)

Property Insurance protects your client's facilities, inventory, supplies, and equipment from events that could cause major interruptions in their day-to-day operations. Typically, Property policies cover loss or damage caused by fire, wind damage, theft, and vandalism. For example, if your client's machinery is destroyed in a windstorm, Property Insurance pays to replace it, which means your client can get back to business sooner rather than later.

Workers' Compensation

With all its machinery, a manufacturing facility can be a dangerous place for employees, and the potential for a work illness or injury is high. Your client needs Workers' Compensation Insurance to cover their employees' medical expenses and lost wages when they suffer occupational ailments. Workers' Comp also covers your client's legal fees if injured employees decide to sue. Most states require some degree of Workers' Comp coverage, but the amount and conditions vary from place to place. An Insurance Noodle agent can help you determine your client's obligations.

Umbrella / Excess Liability Insurance

Your manufacturing client might want to consider adding Excess Liability Insurance to their business protection plan. Excess Liability Insurance extends your client's protection by allowing them to draw on more coverage when a liability policy has reached its limit. So if your client's General Liability policy limit is $1,000,000, but they are found liable for $1,500,000, Excess Liability Insurance can cover the remaining $500,000. Umbrella Insurance is a type of Excess Liability, but it extends the coverage of multiple liability policies. With either policy, your client pays only one premium and gets extra coverage.

Tips for Insuring Manufacturers

One way you can be a valuable asset for your clients is too give them sound advice for mitigating their risk. For a manufacturer, that means..

Training employees in proper safety protocols.

Maintaining meticulous records.

Finding secondary supply channels.

An attendee suffers an injury.

Your expertise can open your client's eyes to the perils they face and help them make wise choices in their insurance purchases. Plus, the good will you generate can turn into more business for your agency.

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