Factories produce a wide range of materials and are engaged in a variety of processes, making it difficult for insurers to offer a generic policy to accommodate all businesses that operate a factory.
As a result, the policies that make up a factory insurance package are dependent on the industry your business is in – as well as the risks it faces. You will need to work with your insurer to provide key information – or agree to specific conditions – to make sure your cover can protect against as many potential threats as possible.
For example, your insurer may specify the level of security that should be in place at your factory, ask about the materials and processes you use or ask for specifications of the building in which your factory is based. Providing detailed information – and reading your policy wording carefully – can ensure you purchase a bespoke factory insurance package that properly meets your business needs.
Some of the key policies you may be offered as part of a factory insurance package include:
- Public liability insurance:
Public liability insurance could prove to be essential for your factory. It can provide protection against claims from third parties that your factory or business practices have caused them to suffer illness or injury – or caused damage to their property. It may help you to take health and safety precautions at your factory, such as providing protective clothing and equipment for your visitors, as well as training workers in the proper operation of machinery. Ensuring procedures are in place for the safe storage and removal of hazardous raw and waste materials is a sensible approach too.
Click the link for a public liability insurance quote.
- Employers’ liability insurance:
Employers’ liability insurance concerns incidents or materials that result in your employees suffering illness or injury as a result of working for you. This cover can provide financial assistance if you need to defend against such claims from your staff. You are legally required to purchase employers’ liability insurance if you employ workers – whether on a full-time, part-time, paid or unpaid basis. This cover includes injury caused to employees due to the actions of another employee.
Additionally, you may also include employee dishonesty insurance in your insurance package, which can provide compensation if you lose money or tools due to theft by an employee.
- Product liability insurance:
If your factory manufactures products for consumer use, or if you supply products to other businesses, you may benefit from product liability insurance. Many factories are legally required to hold product liability insurance. This cover can provide financial assistance if you need to defend against claims that your product has caused your customer or client to become ill or injured.
Many insurers may ask that you make sure your factory adheres to industry best practice standards, including fully training staff, keeping records of everything you work on and making sure machinery is up to date and well-maintained. If you import or export items as part of your business, you may need to specify this in your product liability cover. Insurers may ask you to split this cover between different countries.
Depending on what you produce at your factory, you may need to include product recall insurance which can come in handy if a product you have created is deemed unsafe for consumers. Cover typically includes the cost of the recall, cost of replacing the defective product, loss of profit and any costs involved in defending your business in court. It can also include costs such as hiring public relations professionals to repair any damage to your reputation, and consultants to advise on recreating the products to approved standards. The total cost of your product liability insurance policy will differ depending on the level of risk that your product poses. For example, a small business's product liability insurance policy will cost the same as a larger business if all other variables, such as units sold, quality check procedures and level of risk, were equal.
- Buildings insurance:
Potentially crucial for protecting your factory, building insurance can cover the cost of repairing your factory if it is damaged due to fire, flood, unexpected strong weather, accidents or due to malicious acts such as vandalism. Buildings insurance can also include damage due to ‘special perils’ such as explosions, riots and impact by aircraft, road and rail vehicles. When purchasing buildings insurance, make your policy covers the cost of fully rebuilding your factory after complete destruction, and any fees that could be involved.
- Contents insurance:
Contents insurance can protect the general contents of your factory – such as items in an attached office, tables, chairs, desks and computers – and can also extend to cover specialist equipment and machinery, including your stock and materials. Contents insurance is designed to provide financial assistance if your contents need repairing or replacing due to damage, theft or accidental loss. This includes items in active use and those in storage.
You can add stock insurance to your policy which can specifically protect your stock and any related materials. You will need to insure your stock for its cost price, rather than its retail price. Many insurers offer seasonal stock increase insurance to compensate for extra stock you may have at your factory during your busiest times, and provide provisions for production fluctuations that may affect the amount of stock you produce.
For certain types of goods – such as those that are especially prone to water damage – insurers may include a stillage warranty in their policy wording. This is a condition that you will store certain stock (and materials) on stillage, pallets, shelving or racks in order to keep them a certain height off the floor.
For a more detailed look at what stock insurance is and how it can protect your business, click the link.
- Business equipment insurance:
You can also purchase separate business equipment insurance to specifically cover the machinery, plant and equipment used for at your factory. Typically, you can choose between ‘replacement as new’ for your items or choose replacement on an ‘indemnity basis’, which takes into account wear and tear when organising a replacement item. If you hire equipment, plant or machinery on a regular basis, plant hire insurance can be helpful.
You can choose to include equipment that is typically used away from the premises, and may benefit from goods in transit insurance if you regularly transport goods – including machinery, equipment, stock and materials for delivery or shipment. This cover can provide protection for goods while in your vehicle, and when sent by carrier. There may be a limit for the sum insured for each consignment or vehicle.
- Cash on premises cover:
Cash on premises cover can provide protection for your business money both in and out of business hours. This cover can apply to money at your business premises in safes or drawers, at the home of employees and directors, or in transit – for example to and from the bank. You may include personal assault cover which can provide compensation for yourself or your employees if you are injured during the theft or attempted theft of your business’s cash.
- Business interruption insurance:
Business interruption insurance can prove useful if you find yourself unable to trade due to an event covered in your insurance policy. This cover can provide financial assistance for any loss of revenue you experience during this time and can also pay any increased working costs or accountant fees that you may need to cover. Business interruption insurance can be relevant if you experience damage to your factory and its machinery, loss of stock or raw materials, disruption to your electricity, water or gas supply, or a problem with your suppliers which prevents you from operating at normal capacity.
- Engineering insurance:
Engineering insurance can provide cover against the electrical or mechanical breakdown of your business machinery and equipment, including computers. You may be legally required to arrange for inspections of the items in your factory by a qualified engineer. Your insurer may recommend trusted and qualified engineers as part of your insurance package.
Further covers you may consider include:
- Fleet insurance: if you use multiple vehicles for your business, you may benefit from fleet insurance which can help protect them against damage, fire and theft.
- Directors and Officers (D&O) insurance: if your factory has executive-level employees, you may consider D&O insurance, which can provide financial assistance if you need to defend against claims that these employees have committed wrongful acts during their work with you. This can include negligence or publishing misleading statements.
- Professional indemnity insurance: this may be useful if you offer design, manufacturing or similar services – or provide advice to other businesses or individuals. Professional indemnity insurance can provide protection if your service or advice is blamed for causing financial, material or physical harm to the concerned party. For further information, be sure to visit our 'professional indemnity insurance explained' page.
- Terrorism cover: often offered as an option, terrorism cover can protect your factory if acts of terrorism impact the running of your business.
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