Plastic Manufacturing Insurance
(Why Business Interruption Is a Huge Threat to Plastic Manufacturers)
Written by
Jessica Huneck is an insurance writer from TrustedChoice.com. She began her writing career in 2011 and has since earned herself a bachelor's degree in English writing.
Plastics and plastic products manufacturers encompass a broad range of businesses that may mold, form, laminate and use extrusion to fashion plastic parts and products.
Your business may be susceptible to losses due to equipment breakdown, defective parts, fire, weather, employee injury and other types of unforeseen business interruptions.
Safety Concerns and Business Interruptions Can Have Enormous Costs
Plastics manufacturers face safety concerns and other perils in their day-to-day operations. If you own or operate a plastics manufacturing business, you need to understand all of the risks that are present and work with an independent insurance agent to find business insurance policies that will help mitigate those risks.
Consider the potential for the following types of property damage, accident or financial loss:
- Employee injuries (burns, machinery dangers, slips and falls, etc.)
- Equipment and building damage due to accidents, fire, theft, weather and other natural disasters
- Machinery and equipment breakdown
- Product and inventory loss due to utility interruptions
- Damage to products in transit
- Product defects and recalls
All of these risks come with a hefty price tag. You need a comprehensive plastics manufacturing insurance program in order to address these risks and more, depending on the specific needs of your business.
What Types of Plastics Manufacturing Insurance Do You Need?
You can protect your business and your employees from the costs associated with injuries, property damage, business interruption and more with comprehensive manufacturing insurance tailored to your needs.
- Commercial general liability (CGL) insurance protects you in the event of third-party lawsuits, with coverage for attorney fees, court costs, settlements and judgments up to the limits of your policy.
- Product liability insurance covers your financial responsibility for losses or injuries to a user, buyer or bystander caused by a defect or malfunction of your product. Some product liability coverage is usually included in standard commercial general liability (CGL) policies. You need to work with an experienced insurance agent to help you determine how much product liability exposure you have, and how much and what type of coverage you need.
- Commercial auto insurance covers your vehicle fleet and drivers in the event of an accident or other vehicle damage that occurs with owned vehicles. It provides coverage for property damage and bodily injury liability claims, vehicle damage and medical bills as well as any costs related to lawsuits due to auto accidents involving your vehicle fleet.
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Property and Business Interruption Coverage Can Help Keep You in Business
A plastics manufacturing plant is as susceptible to fire, theft, vandalism and natural disasters as any other type manufacturing business. You need commercial property insurance to protect your building and other property in the event of a covered loss.
Commercial property insurance protects your business if a fire, vandalism, smoke, theft or another covered peril (cause of loss) damages your property.
It provides coverage for lost inventory, industrial equipment and machinery, warehouses and office space, office equipment, computers, valuable papers, and more. It may also provide coverage for neighboring facilities and completed products housed on your premises.
Fire and weather events can cause physical damage to your business property. In addition, these types of events can force you to close your doors in order to make repairs or replace your building or equipment.
Days, weeks or months without the ability to produce can put you out of business for good. How will you pay your bills, salaries and other expenses? Can you ever recover the lost revenue?
Commercial property insurance policies usually include business interruption coverage, or business income coverage, which protects your earnings if your business is unable to operate because of damage caused by some type of covered disruption (fire, hail, wind, equipment breakdown).
This coverage is invaluable if you are forced to close your doors for a period of time in order to make repairs. It pays for rent, employee salaries, lost income, relocation fees and more.
In addition, you can expand your business income policy to include coverage for breakdowns in utility services (water, electrical) that force you to temporarily close your doors. Imagine losing power in the middle of the extrusion process.
Adding utility interruption coverage to your business property/business interruption policy may allow you to cover your losses for a predetermined time or until utility service is recovered. It can also cover damage to your property that results from an interruption of any utility services specifically covered by the policy.
You may also want to add an endorsement to include coverage for lost or spoiled product (e.g., the molten plastic that cools and then hardens, thus ruined, if you have a utility interruption during the extrusion process).
Property damage and lost income due to utility interruption are not covered in your basic business interruption policy. You must talk to your independent agent to determine if you need this additional coverage.
Another major property concern for plastics manufacturers is the potential for damage to your product as it is being transported from place to place.
- Inland marine insurance protects you from losses when cargo is damaged in transit. Any piece of property that is moved from one location to another can be covered with an inland marine policy. It covers a variety of shipping and transit situations including but not limited to shipments from a supplier to a user, private shipments from one party to another and shipments from a main warehouse to a retail outlet.
Now consider your machinery and equipment. A breakdown of your specialized equipment could cause additional property damage as well as rendering your business unable to operate, pay for expenses and earn revenue.
- Equipment breakdown insurance, often referred to as boiler and machinery coverage, supplements your business property insurance. It covers certain costs associated with accidental breakdown of machinery or equipment and the resulting property damage or loss. Equipment breakdown coverage typically covers breakdowns due to power surges, motor burnout, boiler malfunction and even operator error. You can obtain coverage for mechanical and electrical equipment, computers and computer systems, boilers, and other types of pressure equipment.
Boiler and machinery insurance covers repair and replacement costs as well as business interruption costs related to a breakdown of covered machinery or equipment.
Workers’ Compensation Insurance Is Important Protection for Your Workers
The safety of your employees should be one of your highest priorities, especially in a manufacturing environment where dangers abound. Workers’ compensation insurance is an affordable way to protect your business and your employees from the costs of work-related injuries and illnesses.
It provides benefits to injured workers regardless of who is at fault and will provide death benefits for a worker’s dependents if he or she is killed as a result of a workplace incident.
Providing workers’ compensation insurance provides peace of mind for your employees and eliminates the possibility that an injured worker will sue you for damages.
Workers’ compensation rates are partially based on your company’s history of workers’ compensation claims. What can you do to keep your employees safe at work and reduce workers’ compensation claims? The best way is to provide a workplace in which safety and injury prevention are top priorities.
While every injury or illness cannot be prevented, implementing proper safety and risk management techniques goes a long way toward keeping everyone healthy and happy and keeping the number of workers’ compensation claims down.
Almost every state requires employers to carry workers’ compensation insurance – with a few exceptions. If you don’t have workers’ compensation insurance as required by your state, you may be subject to significant fines and penalties. What’s more, without protection from workers’ compensation insurance, injured employees can sue you.
Because the plastics manufacturing industry can be dangerous for employees, workers’ compensation is one of the most important aspects of your business insurance program.
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How to Find the Best Insurance for Plastics Manufacturers
Plastics manufacturers face a variety of risks that cannot be understated. You need to enlist the help of an experienced, knowledgeable independent insurance agent who can work with multiple insurance companies to find the best coverage for your unique needs.
Business insurance is one of the most important ways to protect your business from all kinds of losses that can literally put you out of business. You need the advice and counsel of a local agent who knows your business and who can be a partner in protecting your business for the long term.