Startup or small manufacturing business companies that turn to Google looking for business Insurance are, I’m sure, overwhelmed by the resulting choices. So many results that you’re probably scratching your head and wondering where to start and who to speak to about making the right decisions around business insurance for your manufacturing company. In this video I’m going to give you a broad overview of what you need to be thinking about and an action plan to get you going in the right direction.
So, when it comes to making the right decisions around business insurance for a small manufacturing company, where do you start? What are the big issues you’ve got to tackle? How do you prioritize what insurance to purchase? If you use a broker is it more expensive than buying online directly?
I’m going to answer these questions and more in a moment, but I want to start off with a bit of advice.
Your business may be the most important asset you own.
Whether you’re just starting up, or have been in business for years. Your business creates your income, your lifestyle, and hopefully your retirement – so protecting it properly is serious, and we take the responsibility of insuring our clients seriously – we know what’s at stake.
There’s a difference between well priced and cheap and as you start your insurance buying journey I think it’s important to get the best value from your business insurance relationship and not buy the cheapest policy you can find.
Okay, with that out of the way, let’s talk about some of the coverage issues you need to be thinking about:
First is your property insurance
This will cover your building if you own it or have to insure it by a lease requirement, plus the contents in that building. Contents will include the value of your machinery and equipment, furniture, fixtures, office equipment, raw materials, supplies, work in progress and finished goods.
Often there’s a tendency to under-insure property, thinking that by shaving a bit off the 100% replacement values you’ll save substantial premium dollars.
Not a great idea in my opinion, because if there’s a loss, like a bad fire, which does happen, you want to replace everything for its replacement value and not face a shortfall at the worst possible moment.
Within the property insurance portion of this discussion there is also business interruption insurance – which is also called business income coverage.
This coverage part is intended to replace your lost revenue and profits when business operations are fully or partially suspended due to a covered loss – like a fire. Some policies provide what’s known as Actual Loss Sustained coverage , which is great, but can also be limiting, but many policies require that you state a limit of coverage and this is where it gets tricky for many insurance agents who leave it up to round numbers.
This is a danger or warning sign. In order to get this right, you need to complete a business income worksheet every year to make sure your values are accurate.
I can’t emphasize this enough because business interruption insurance will make or break your company’s recovery from a bad disaster.
The other property related coverage that’s critical is equipment breakdown coverage which used to be called boiler and machinery insurance. For manufacturers, equipment breakdown coverage is critical due to the reliance you have on machinery.
This coverage part actually insures the damage and resulting financial consequence of a sudden mechanical breakdown of your processing and manufacturing equipment.
Okay, now onto liability.
General Liability is a form of insurance all businesses need and it’s broken into two sections – premises coverage which insures you from claims like slips and falls that occur on your premises and the second part which is more important for manufacturers is Products Liability which covers you for claims which arise from faulty or dangerous products that cause bodily injury or property damage to others. So, if your product injures someone, makes them sick, or there’s a fatality, this portion of the general liability policy will protect you.
Most manufacturers purchase insurance limits of at least $1,000,0000 or $2,000,000 then purchase an umbrella or excess liability policy to provide extra protection from claims.
Those extra limits may be $1M or higher. We have some clients that have excess limits of $25M, but for small manufacturers $5M to $10M may be sufficient.
Now onto one of the big pain points for small manufacturing business – workers compensation.
The price of workers comp is directly tied to your claim history. I recently did a video on this subject that you can view here.
Other coverage issues that need consideration are:
Cyber Insurance to protect you from various threats, hacks, and schemes to steal data and money.
Business Auto Insurance if you own, lease or use autos in your business.
and finally Product Recall insurance to pay for the very expensive costs of recalling a potentially dangerous or harmful product from the marketplace.
Okay, so what is the best insurance for small manufacturing business?
In my opinion there is no one insurance company that can claim to be the best – yes, there are a lot of brand name insurers that are great at manufacturing accounts. Companies like: Travelers, Hartford, Chubb, Liberty Mutual, CNA and others, but no one insurer is going to be best all the time.
That will vary based on underwriting factors, geographical factors, and your particular business.
What I can tell you is that the best insurance is one that is customized for you. Not something bought off the shelf or purchased online by answering a few underwriting questions that produces a quick and easy quote.
I have unraveled so many of these situations recently that it’s horrifying. Remember what i said at the beginning of this video – your business may be your biggest asset – you don’t want to leave this up to chance or to buy the cheapest policy out there.
So what’s the solution?
This is where a skilled insurance broker steps in to fill the role of advisor to guide you on the specific forms of insurance you need, how to craft the policies, and then give you a choice of insurers to select the best coverage and rate options.
Beyond coverage and price, a good skilled broker can also help you with risk control, safety, and other risk management elements to help reduce costs outside of insurance premiums.
The Coyle Group works with small manufacturing companies across the United States to help craft that best insurance program you’re looking for, and then helps with the safety and risk control issues many firms are looking for.
The best part is that it doesn’t cost you more to work with an expert. We represent the top national and regional insurers that offer very competitive rates on manufacturers.
If you’re looking for expertise, peace of mind, and the best insurance protection for your small or startup manufacturing company then let’s connect.