Business Interruption Insurance: Essential Protection for Manufacturing Operations

What manufacturing companies need most is business interruption coverage. When equipment fails, cyber attacks disrupt operations, or natural disasters strike, business interruption insurance replaces lost income and covers ongoing expenses during downtime. For ransomware losses, business interruption (BI) accounts for the largest share of costs (51%) among all cost components.

Key Benefits of Business Interruption Coverage:

• Lost Revenue Replacement: Covers income lost during forced shutdowns

• Fixed Expense Coverage: Pays rent, utilities, and payroll during interruptions

• Extended Period Protection: Continues coverage even after operations resume

• Supply Chain Disruption: Protects against vendor and supplier interruptions

Thirty to 40 percent of small businesses opt for business interruption insurance when choosing business insurance options, but manufacturers face higher risks and should prioritize this coverage. Manufacturing facilities with complex equipment and just-in-time inventory systems are particularly vulnerable to extended downtime.

Average Cost: Most small businesses can expect to pay between $500 and $3,000 for a BOP that includes business interruption coverage, making it an affordable safeguard for your operations.

Equipment Breakdown Insurance: Protecting Your Manufacturing Equipment

Manufacturing equipment represents significant capital investment, and unexpected breakdowns can halt production instantly. Equipment breakdown insurance covers the cost of repairing or replacing critical machinery, plus the business income lost during repairs.

What Equipment Breakdown Insurance Covers:

• Mechanical Breakdown: Motors, compressors, and production machinery

• Electrical System Failures: Power surges, transformer damage, electrical shorts

• Boiler and Pressure Vessel Issues: Steam systems and pressure equipment

• Computer Equipment: Manufacturing control systems and data processing equipment

• Expediting Expenses: Rush shipping for replacement parts and emergency repairs

Fire has also become an elevated risk with electrification and the growing prevalence of lithium-ion batteries. Modern manufacturing equipment with advanced electronics requires specialized coverage that traditional property insurance doesn't provide.

Smart Tip: Regular equipment maintenance and proper documentation can reduce your premiums while ensuring faster claim settlements when breakdowns occur.

Cyber Insurance for Manufacturing: Defending Against Digital Threats

Manufacturing was again identified as the industry with the highest proportion of ransomware claims among all claims for that segment. Cyber insurance has become essential for manufacturers as operations increasingly rely on connected systems and digital supply chains.

Critical Cyber Coverage for Manufacturers:

• Ransomware Protection: Coverage for ransom payments and system restoration

• Business Interruption: Lost income from cyber-related shutdowns

• Data Breach Response: Legal fees, notification costs, and credit monitoring

• Supply Chain Cyber Events: Protection when vendors experience cyber incidents

• System Restoration: Costs to rebuild compromised IT and operational systems

Total global loss attributable to cybercrime in 2024 has climbed to an estimated $9.5 trillion – an increase of over 300% since 2015. Manufacturing companies cannot afford to operate without comprehensive cyber protection.

Recent Trend: Contingent business interruption events stemming from supplier compromises jumped to 15% of large claim values in the first half of 2025, compared with just 6% the previous year.

Supply Chain Insurance: Managing Interconnected Manufacturing Risks

Modern manufacturers operate within complex supply chains where disruption at one point can impact the entire network. Supply chain insurance protects against losses when key suppliers, customers, or logistics partners experience covered incidents.

Supply Chain Protection Includes:

• Contingent Business Interruption: Coverage when suppliers can't deliver

• Customer Dependency: Protection if major customers can't accept deliveries

• Transportation Disruption: Coverage for shipping and logistics interruptions

• Vendor Risk Management: Protection against third-party failures

These supply chain disruptions cause severe economic damages, ranging up to 5% to 10% of product costs and additional downtime impacts. Smart manufacturers are investing in supply chain resilience through both operational improvements and comprehensive insurance coverage.

Product Liability Insurance: Protecting Manufacturing Companies

Manufacturing companies face unique liability exposures from the products they create. Product liability insurance protects against claims alleging that your manufactured goods caused bodily injury or property damage to third parties.

Essential Product Liability Protection:

• Manufacturing Defects: Coverage for flaws in production processes

• Design Defects: Protection against inadequate product design claims

• Failure to Warn: Coverage for inadequate safety instructions or warnings

• Recall Coverage: Costs associated with product recalls

• Legal Defense: Attorney fees and court costs for liability lawsuits

Industry Insight: When this policy includes product liability insurance, high-risk products—such as cannabis or pharmaceuticals—can drive up costs as well. We help manufacturers in all sectors find affordable coverage tailored to their specific product risks.

Workers' Compensation Insurance: Essential Manufacturing Coverage

Manufacturing environments present numerous workplace hazards, making workers' compensation insurance both legally required and financially critical. This coverage protects your employees and your business from the costs of workplace injuries.

Workers' Compensation Benefits:

• Medical Expenses: Full coverage for injury-related medical treatment

• Lost Wages: Partial income replacement during recovery periods

• Disability Benefits: Long-term support for permanently disabled workers

• Rehabilitation Services: Physical therapy and vocational retraining

• Legal Protection: Defense against employee injury lawsuits

North Carolina offers the lowest rates at $50 monthly and New York the highest at $69 monthly for workers' compensation, demonstrating how location impacts manufacturing insurance costs.

Commercial Property Insurance: Protecting Manufacturing Facilities

Your manufacturing facility, equipment, and inventory represent significant investments that require comprehensive property insurance protection. Commercial property coverage safeguards against fire, theft, vandalism, and natural disasters.

Property Insurance Coverage:

• Building Coverage: Protection for manufacturing facilities and improvements

• Equipment Protection: Coverage for machinery, tools, and production equipment

• Inventory Coverage: Protection for raw materials, work-in-progress, and finished goods

• Business Personal Property: Coverage for office equipment, furniture, and supplies

• Ordinance and Law: Additional coverage for building code compliance

Fire remains the fourth most important risk at 25% for Manufacturing businesses in 2025. Proper property insurance ensures you can rebuild and resume operations quickly after covered losses.

Environmental Liability Insurance: Managing Manufacturing Environmental Risks

Manufacturing operations often involve chemicals, waste products, and processes that could impact the environment. Environmental liability insurance protects against cleanup costs, regulatory fines, and third-party environmental damage claims.

Environmental Coverage Essentials:

• Pollution Cleanup: Costs to remediate environmental contamination

• Regulatory Fines: Protection against EPA and state environmental penalties

• Third-Party Claims: Coverage for environmental damage to neighboring properties

• Transportation Coverage: Protection during hazardous material transport

• Legal Defense: Attorney fees for environmental litigation

Compliance Focus: Environmental regulations continue evolving, and manufacturers must stay current with requirements while maintaining adequate insurance protection against environmental liabilities.

General Liability Insurance: Foundation Protection for Manufacturers

General liability insurance provides essential protection against common business risks, including customer injuries, property damage, and advertising liability claims.

General Liability Covers:

• Bodily Injury: Medical expenses when customers are injured on your property

• Property Damage: Costs when your business activities damage others' property

• Personal Injury: Protection against libel, slander, and privacy violation claims

• Product Liability: Basic coverage for product-related injury claims

• Completed Operations: Coverage for work performed away from your premises

Among manufacturers that purchase general liability with Insureon, 50% pay less than $50 per month and 33% pay between $50 and $100. This affordable coverage provides essential protection for daily business operations.

Risk Management: Smart Strategies for Manufacturing Companies

Effective risk management goes beyond insurance coverage to include proactive strategies that reduce your exposure to losses and lower insurance costs over time.

Comprehensive Risk Management Approach:

• Safety Programs: Implementing comprehensive workplace safety protocols

• Equipment Maintenance: Preventive maintenance schedules to prevent breakdowns

• Cyber Security: Robust IT security measures and employee training

• Supply Chain Diversification: Multiple suppliers to reduce dependency risks

• Emergency Planning: Detailed disaster response and business continuity plans

The top three important actions companies are taking to de-risk their supply chains and make them more resilient, according to Risk Barometer respondents are diversifying suppliers, improving visibility, and enhancing supplier assessments.

Manufacturing Insurance Costs: What to Expect in 2025

Understanding manufacturing insurance costs helps you budget effectively and make informed coverage decisions. Several factors influence your premiums:

Cost Factors:

• Business Size: Annual revenue, number of employees, facility square footage

• Industry Risk: Specific manufacturing processes and materials used

• Location: Geographic risks including natural disasters and crime rates

• Claims History: Previous losses impact future premium calculations

• Coverage Limits: Higher limits provide more protection but increase costs

Manufacturing business insurance costs range from $38 to $65 monthly, with business owner policies offering the most affordable rates. However, comprehensive coverage for larger operations typically requires higher investment.

Cost-Saving Strategies:

• Bundle Policies: Business owner's policies combine multiple coverages at discounted rates

• Higher Deductibles: Accepting more risk can significantly reduce premiums

• Safety Programs: Demonstrating strong risk management can earn premium discounts

• Annual Payment: Paying annually instead of monthly often provides savings

Property Insurance: Comprehensive Asset Protection

Manufacturing facilities require specialized property insurance that addresses unique exposures including large buildings, expensive equipment, and significant inventory values.

Specialized Property Coverage:

• Replacement Cost Coverage: Full rebuilding costs without depreciation

• Business Income: Coverage for lost profits during property damage repairs

• Equipment Replacement: Current value coverage for manufacturing machinery

• Inventory Protection: Coverage for raw materials and finished goods

• Utility Interruption: Protection when utility failures cause covered losses

Valuation Importance: Property underinsurance is also on the rise, with Aviva estimating that 45% of commercial properties in the UK might be underinsured. Regular property valuations ensure adequate coverage limits.