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Industry Insights

Words of wisdom from our business insurance experts.

Manufacturers Business Insurance: Risks and Coverage

10 min read
July 24, 2023
Manufacturers Business Insurance: Risks and Coverage

There’s no denying the fact that the manufacturing industry still plays a massive role in the American economy. According to National Association of Manufacturers statistics, the manufacturing industry employs 8.41 percent of the US workforce. And in 2021, the industry’s total output was $2.5 trillion—or 10.7 percent of the US GDP.

But no matter what your manufacturing company produces, it needs the right insurance policies to function safely. Manufacturers face countless risks on a daily basis, from property damage and worker injuries to the potential effects of decisions made by their executives. Without insurance, you’ll be in serious trouble if you find yourself dealing with any of these situations.

Are you curious about the types of insurance coverage your manufacturing business might need? If so, read on for our comprehensive guide to the insurance policies that are vital for companies in the manufacturing industry.

What is a manufacturing business?

A manufacturing business is any company that takes raw parts, materials, and components and uses them to create finished goods. To accomplish this goal, manufacturing companies can rely on machines, manual labor, or a combination of the two. The goods that manufacturers produce may be sold directly to consumers, other manufacturers (to create more complicated products), or wholesalers.

Some common types of manufacturing businesses are:

  • Wood manufacturers
  • Paper manufacturers
  • Metal manufacturers
  • Furniture manufacturers
  • Food and beverage manufacturers
  • Electronics manufacturers
  • Clothing manufacturers
  • Chemical manufacturers
  • Cannabis manufacturers
  • Auto manufacturers

What risks do they have?

A few of the many risks manufacturing businesses often face include:

Product liability

By their very nature, manufacturing businesses make products—and that comes with a certain level of liability risk If a customer becomes ill or gets injured because they used your product, there’s a good chance they’ll take legal action.

Injuries to workers

Even the hardest-working employees at your company could get injured while on the job. Factories are full of potential hazards to your workers’ health and well-being, from heavy equipment to electrical panels. Because of that, you’ll need to ensure you have insurance coverage in place for your employees.

Data breaches

In the modern age, just about any company you could imagine is vulnerable to cyberattacks—including your own. When sensitive information about your employees or customers is leaked or services you rely on go offline, you could stand to lose a great deal of money while responding to these problems.

Property damage

If your business has any type of physical property, there’s a chance that this property could be damaged. That includes the building you use and other physical assets, such as equipment. And while natural disasters are a prominent cause of property damage, you should also be aware of the risks posed by vandalism and theft.

Auto accidents

Does your manufacturing business use at least one vehicle? If so, you could find yourself dealing with an auto accident—and the medical bills, property damage costs, and lawsuits that could arise in its wake.

What insurance policies do they need?

Clearly, manufacturing companies face no shortage of risks. With that in mind, your manufacturing business should have these insurance policies in place:

General liability insurance

No business can go without a general liability insurance policy. For manufacturers, these policies can protect them in the event that a product they made causes harm to a user. With general liability insurance, you’ll get help paying for medical bills and lawsuit-related expenses.

Along with its ability to cover damage caused by your company’s products, general liability insurance can help you deal with injuries sustained by customers while they’re on your physical property. Though manufacturing businesses don’t face this particular risk as often as other companies do, you could still find yourself in a situation where a visitor gets hurt during a visit to your factory.

Commercial property insurance

Burst water pipes, fires, and earthquakes can all do significant damage to your manufacturing business’ property, and the same is true for theft and vandalism. No matter what threats your company’s physical location and assets face, it’s crucial to have insurance coverage for these dangers.

Commercial property insurance is meant to help business owners deal with the risks that come with renting or owning property. These policies cover your building(s), furniture, supplies, and inventory against fires, flooding, break-ins, and other unexpected occurrences.

Business owner’s policy

As you can see, both commercial property insurance and general liability insurance are essential for manufacturers. But you might not need to buy these policies separately—if your manufacturing business meets specific qualifications, it may be eligible for a business owner’s policy (BOP).

Essentially, a BOP is a bundle containing general liability insurance and commercial property insurance. BOPs usually cost less than these policies do on their own, but not all businesses qualify for a BOP. It’s worth looking into this type of coverage if your manufacturing business has less than 100 employees, works out of a small facility, and earns less than a million dollars in revenue each year.

Directors and officers insurance

As is the case for important people at most businesses, your manufacturing company’s executives are responsible for making high-stakes choices on a daily basis. But these people are only human, meaning there’s always a chance that their decisions will have unintended consequences—and could even lead to pricey lawsuits if things really go wrong.

Directors and officers insurance (also known as “D&O insurance”) can help you out in situations like these. When you have this form of insurance, the defense expenses incurred by your company’s managers and board members while responding to allegations of wrongdoing will be covered. That’s not the only situation D&O insurance can help you deal with, either—it can also assist in your payments for awards, damages, and settlements.

Workers’ compensation insurance

While you can take steps to lower the risk of injury to your factory’s employees, you can never truly eliminate this risk. If one of your workers gets hurt in an accident, there’s a chance that you could get sued. And even if this worker doesn’t choose to take legal action, you’ll have to deal with the financial setbacks that come with having an employee out of commission.

Fortunately, workers’ compensation insurance can assist when you need to pay immediate and ongoing medical costs and help you deal with partial lost wages. Employer’s liability insurance, which is commonly included in workers’ comp policies, can take care of injury-related court and settlement costs.

Cyber insurance

If you run a small manufacturing business, it’s hard to overstate how much damage a data breach or cyberattack could do to your company. Though the exact requirements vary based on where your business operates, all 50 US states require companies to let people affected by data breaches know when these events happen. Meanwhile, you might have to deal with cyber extortion, data recovery, and an investigation into the situation—all of which come with hefty expenses.

Investing in cyber liability insurance is the simplest and best way to deal with these risks. These policies can cover notification costs, credit monitoring services, PR campaigns related to cyberattacks, losses caused by interruptions to your business, cyber extortion payments, and data breach investigations.

Commercial auto insurance

Even if your employees are consistently safe motorists, that’s not always the case for their fellow drivers. And no matter who’s at fault in an auto accident, your company vehicle could get totaled or someone could get injured. Of course, these situations could come with a significant price tag for your manufacturing business.

You’ll need a commercial auto insurance policy to cover the potential costs of property damage and lawsuits. Along with these expenses, commercial auto insurance can help you replace or repair your vehicle if it’s vandalized or stolen. You can also adjust these insurance policies based on how often your company makes deliveries.

Umbrella liability insurance

All of the policies listed above have one thing in common—namely, policy limits. If your factory gets sued, there’s a good chance that the expenses will be greater than what these policies are capable of covering on their own.

The good news is that there’s a way to avoid this problem. By investing in commercial umbrella insurance, you can supplement the coverage provided by your general liability, employer’s liability, and commercial auto insurance policies—making it an excellent choice for small businesses concerned about the possibility of going over their coverage limits.


The US manufacturing industry is a major player in America’s economy, but that doesn’t make companies in this line of work immune to risks. Whether you’re responsible for a small factory or a massive manufacturing business, you’ll always face threats like auto accidents, cybercrime, and customer lawsuits.

To deal with these issues, all you need to do is invest in a few insurance policies. When you purchase general liability insurance, commercial property insurance, D&O insurance, and some other types of coverage, you can mitigate the risks your company faces. As a result, you’ll be able to put 100 percent of your focus toward running your manufacturing business as effectively as possible.

Get in touch with your risk advisor and insurance broker today.

Tyler Crawford
by Tyler Crawford
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