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What Manufacturing Insurance Covers
Manufacturing insurance covers the buildings, plant, stock and product liability of a factory or workshop, along with the income lost when a line stops. A maker carries risks a reseller never sees. The goods leave the site with your name on them, and a single machine can hold up every order in the book.
Fire is the loss that closes factories. Raw materials, packaging, dust and solvents burn hard, and the rebuild then waits on planning approvals and machine lead times from overseas. Breakdown is the quieter version of the same problem: a press, compressor or oven fails, and production stops until the replacement part lands. A fire at a key supplier can stop your line just as effectively.
A property policy pays for fire and impact, not for a machine that fails on its own, so machinery breakdown is a section you add. Injury to a contractor or a visitor on the floor answers to public liability insurance, which many principals want to see before they issue a purchase order. Set the indemnity period on business interruption insurance against real rebuild and re-equipping time.
Fortis Risk Solutions arranges manufacturing insurance as part of our business insurance range, from offices in Box Hill and Hawthorn. We walk through what you make, which machines are irreplaceable in a hurry, where the components come from and who you supply, then take that picture to insurers who write industrial risk rather than generic packages.
Manufacturing Insurance: Cover Sections and Benefits
What Factory and Manufacturing Insurance does not cover
A factory package pays for sudden damage and for the liability that follows a defective product. It does not pay to put your own product right, and it does not carry plant problems that built up over time. Typical manufacturing insurance exclusions include:
- The cost of repairing or replacing your own faulty product, as distinct from the damage that product causes
- Product recall and withdrawal expenses, which need a separate recall extension
- Wear and tear, and mechanical or electrical breakdown of plant unless machinery breakdown is added
- Faulty design and workmanship, with cover limited to the resulting damage
- Liability accepted under a supply contract that goes further than the law would impose
- Injury to employees and labour hire staff, which sits with workers compensation
- Goods being worked on, and plant hired in, unless they are declared
FRS reads the exclusions against your production process and your customer contracts, so the indemnity clauses you sign are matched by the policy you hold.
How Factory and Manufacturing Insurance premiums are set
Factory rating starts with the process, not the turnover. A dry assembly line and a coating plant using solvents are priced on different scales. Manufacturing insurance premiums are set on:
- The process itself, including hot work, spraying, dust, solvents and heat treatment
- Building construction, separation between production and storage, and fire protection systems
- Declared values for buildings, plant, machinery, raw materials and finished stock
- Turnover and export sales, since overseas markets change the product liability rating
- Product type, particularly food, children’s items, electrical goods and parts fitted to vehicles
- Safety record, machine guarding, maintenance records and workers compensation claims
- The liability limit customers demand in supply agreements, and the excess accepted
FRS sets out the process and the controls in the submission, so underwriters rate the plant as it stands rather than pricing an unknown.
How to claim on Factory and Manufacturing Insurance
Factory claims are damage plus downtime, and the downtime is usually the bigger number. The FRS process for a manufacturing insurance claim:
- Call FRS as soon as the incident happens, and notify WorkSafe where the law requires it for a serious injury or dangerous occurrence
- Make the area safe, and preserve the damaged machine, the failed part and any product involved
- Report theft or malicious damage to police and keep the report number
- Do not admit liability to a customer or an injured person, and pass every letter of demand to FRS
- FRS lodges the claim, agrees the assessor and pushes for interim payments so production can restart
- Production and sales records support the interruption figure, and declared values are reviewed at renewal
Start on our make a claim page and we take it from there.
Factory and Manufacturing Insurance compared with a standard Business Pack
| Question | Factory and Manufacturing Insurance | Standard Business Pack |
|---|---|---|
| What it covers | Buildings, plant, stock, machinery breakdown, product liability and interruption built around a production process | Property, general liability and basic interruption for an office, shop or trade business |
| Who buys it | Factories, food producers, fabricators and assemblers | Retailers, consultants and small service businesses |
| Typical trigger | A machine failure stopping the line, a fire, a product that injures a user | Break in, storm damage, a customer slip |
| Sits with | Workers compensation, marine cargo and commercial motor | Workers compensation and cyber |
The packaged wording runs out at the factory gate. Once production plant, raw materials and product liability come into it, a business insurance pack has to be rebuilt around the process rather than extended.
Manufacturing Insurance FAQs
Manufacturing insurance covers three fronts: the site, the product and the income. Site means buildings, plant, stock and machinery breakdown. Product means the liability that follows goods you made once they are in use somewhere else. Income means the gross profit lost while production is down. Smaller workshops start with a business insurance package and add the industrial sections they need.
No. Property cover responds to an external event such as fire, storm or impact, and it excludes a machine that fails through its own mechanical or electrical fault. Breakdown cover fills that gap and can extend to spoiled work in progress and the hire of a temporary replacement. Larger plants often carry breakdown inside an ISR insurance wording rather than as a bolt-on section.
The manufacturer usually carries it. Under the Australian Consumer Law a supplier can be liable for goods with a safety defect, and suppliers must report goods associated with serious injury or death to the ACCC. Products liability pays compensation and defence costs, whether the fault is in the design, the assembly or the labelling. It applies to goods you import and rebrand as well.
Not automatically. Products liability answers the injury or damage the item causes, not the cost of getting the item back. Recall expenses such as freight, storage, destruction and customer notification need a recall extension or a separate policy, and insurers will ask about batch coding and traceability before they offer it. Food, cosmetics and components sold into vehicles are the usual candidates.
Only under a transit or cargo section. Property cover stops at the boundary of the site, so finished goods on a truck, in a container or on a ship need marine insurance. Who arranges that cover depends on the Incoterms in the sale contract, because the point where risk passes to the buyer is set there. Read the contract before you assume the customer is insuring the shipment.
Factory risk sits in the detail: declared values, the indemnity period, breakdown conditions and how the products liability wording treats export sales. FRS helps you disclose processes and materials accurately, structure limits for plant and stock, compare specialist industrial insurers and act as your advocate at claim time. Owner-run factories should also review management liability insurance for employment and regulatory claims.