How Much Does Manufacturing Insurance Cost in Canada?

What Liability Risks Do Manufacturers Face?

Manufacturers are responsible for what they make, how the products are made, and who it impacts. That poses several liability risks, including the following:

Product Liability

Manufacturers are liable for any product they manufacture, distribute, or sell. If a product or component made by a manufacturer injures someone or damages their property – for example, a defective or mislabelled product – they may be responsible for paying for those damages or could face a lawsuit.

General Liability

The cost of third-party bodily injury claims or damages to another person’s property caused by your usual operations or a customer visiting your business premises, such as a trip and fall incident, can be substantial. 

Errors and Omissions (E&O)

Mistakes, oversights, giving incorrect advice, or allegations of professional negligence or wrongdoing related to product designs or manufacturing.

Environmental Liability

Sudden or gradual pollution or contamination caused by a company’s manufacturing processes that causes illnesses or injuries to others or damages the environment and neighbouring properties.

Product Recalls

Products or components subject to government recalls because of defects are expensive and can damage a company’s reputation.

Employers’ Liability

Injuries or illnesses to employees on the job that go beyond what provincial workers’ compensation coverage provides may result in lawsuits. For example, employees who are exposed to hazardous materials or who work in unsafe conditions.

Cyber Liability

Data breaches and cyber-attacks, such as a ransomware attack, are on the rise. Manufacturers that rely on technology, machine automation, supply chain software, and digital communications are exposed to these threats.

Equipment Breakdowns

Machinery and manufacturing equipment that suddenly ceases to operate because of an internal mechanical or electrical malfunction and leads to a work stoppage.

Theft

Theft of company business contents, components, finished products, and raw materials due to either internal theft, fraud, employee dishonesty, or a burglary or robbery.

Damage to Facilities

A natural disaster, fire, or water that damages a manufacturing facility, offices, or warehouses unexpectedly. 

What Factors Determine the Cost of Manufacturing Insurance?

Several factors influence what an insurer may charge for an annual manufacturing insurance policy. These include:

• A company’s location. Manufacturing facilities in regions prone to natural disasters, such as wildfires or high crime rates, may face higher premiums. Companies located near fire hydrants, fire stations, and police may help keep rates low, as do a facility’s characteristics if built with fire-resistant materials.

• The industry and products. Companies producing high-risk items like machinery or using toxic chemicals in production may face higher rates.

• Business size and annual revenue. Large companies with many employees and high revenue may require more broad coverage to account for their liability risks.

• Value of commercial property and equipment. The value of a manufacturer’s facilities and equipment and the repair or replacement cost.

• Insurance claim history. A company with frequent insurance claims may face higher premiums than those with few claims.

• The coverage in a policy. The types of optional coverages included in a customized policy and their coverage limits can impact annual premiums.

What Is the Average Cost of Insurance for Manufacturing Companies?

The cost of an insurance policy for manufacturing companies varies between insurers and a company’s operations and details.

A small manufacturing company may pay approximately $1,500 to $5,000 for an annual policy. Larger firms or those with more complex operations typically face higher premiums.

What Coverages Does a Manufacturing Insurance Policy Include?

A manufacturing insurance policy may include the following types of coverage:

• General Liability Insurance: General liability insurance covers daily operational risks a manufacturer faces that cause third-party bodily injuries or property damage. It covers an injured person’s medical and rehabilitation expenses, repairing or replacing another’s damaged property, and legal defence fees if the company is sued.

• Product Liability Insurance: Product liability insurance covers claims alleging third-party bodily injury or property damage caused by a company’s product or component. It is typically included in general liability coverage.

• Errors and Omissions (E&O) Insurance: Also called professional liability insurance, E&O insurance covers claims and damages caused by a company’s mistakes, poor advice or workmanship, professional negligence, and failure to deliver a service as promised. 

• Equipment Breakdown Insurance: This type of insurance may pay to repair or replace a manufacturer’s equipment, including production systems, boilers, and HVAC systems, that cease to function properly due to an internal mechanical or electrical failure.

• Commercial Property Insurance: Commercial property insurance is vital to cover damages to a manufacturing facility, its offices and warehouses, and business contents if they are damaged by fire, water, natural disasters, theft, or vandalism.

• Business Interruption Insurance: Business interruption insurance may cover a manufacturer’s lost income, employee payroll, and operational overhead if forced to close temporarily for repairs due to an insurable loss, such as a fire. It may be included in a commercial property insurance policy.

• Commercial Crime Insurance: This coverage protects against employee theft. It also includes money and securities coverage for losses from burglary, robbery, or theft and employee dishonesty coverage for losses or liabilities resulting from fraudulent acts.

• Cyber Insurance: Cyber insurance helps companies recover from data breaches and cyber-attacks. It includes coverage for crisis management services, notification fees, credit monitoring expenses, and the restoration of affected computing systems and software.

How to Get Affordable Manufacturing Insurance Quickly

Zensurance is Canada’s leading business insurance brokerage, serving over 350,000 small businesses and independent professionals across hundreds of industries nationwide, including manufacturing.

Let us help you explore your manufacturing insurance options.

Fill out our online application for a free quote in five minutes or less.

We’ll shop our partner network of more than 50 insurers to get the coverage your business needs, customize it to suit your specific requirements, and issue policy documents and a certificate of insurance in 24 hours or less.

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