If you run a manufacturing business, insurance probably feels like one more line item on an already overwhelming budget. But here's what most manufacturers don't realize until it's too late: the right insurance isn't just about protecting your assets. It's about keeping your doors open when something goes wrong. A single equipment failure, product defect claim, or workplace injury can shut down operations for weeks or even months if you're not properly covered.
This checklist walks you through exactly what coverage you need, what's optional but smart to have, and when to add coverage as your business grows. Think of this as your annual insurance health check—because reviewing your coverage once a year isn't just recommended, it's essential for staying protected as your operations evolve.
Essential Coverage: The Non-Negotiables
Let's start with what you absolutely must have. These aren't suggestions—they're either legally required or practically mandatory if you want to do business with reputable clients.
Workers' compensation insurance is legally required in 49 states if you have employees. This covers medical expenses and lost wages when someone gets injured on the job. In manufacturing, where employees work with heavy machinery and potentially hazardous materials, this isn't just a legal checkbox—it's critical protection. Non-compliance can result in severe penalties, including fines and stop-work orders that halt your entire operation.
General liability insurance is your defense against third-party claims for bodily injury and property damage. Here's the reality: most commercial clients won't work with you without it. Expect requests for $1-2 million in coverage, certificates of insurance, and additional insured endorsements. Large manufacturers often require even stricter proof of coverage before awarding contracts. Without general liability, you're essentially locked out of most commercial opportunities.
Commercial property insurance protects your building, equipment, inventory, and supplies from damage caused by fires, storms, or vandalism. Standard property insurance typically doesn't cover floods or earthquakes, so you'll need separate policies if you're in high-risk areas. Make sure your coverage reflects the current replacement value of your equipment—not what you paid for it five years ago.
Commercial auto insurance is mandatory if your business uses vehicles for deliveries, client visits, or transporting materials. Personal auto policies never cover commercial vehicle use, so this is non-negotiable if vehicles are part of your operations.
Critical Optional Coverage: Add These Before You Need Them
These coverages aren't legally required, but they protect against the exact scenarios that bankrupt manufacturing businesses every year.
Equipment breakdown coverage is critical because nearly half of unplanned downtime with machinery is due to hardware failure. This policy covers repair or replacement costs for broken equipment—including engines, motors, computers, and generators—and reimburses the income you lose while that machine is offline. Many manufacturing policies include this coverage, but verify it's actually in your policy, not just assumed.
Product liability insurance covers claims when your products cause harm or injury. This includes legal fees, medical costs, and compensatory damages. But here's where it gets important: general liability covers bodily injury and property damage from your products, but it doesn't cover financial losses when a product fails to perform. That's where manufacturer's errors and omissions (E&O) insurance comes in—it covers third-party financial losses due to product performance failures. If you manufacture components for other businesses, E&O is essential.
Business interruption insurance replaces lost income and maintains payroll after a covered loss. Think about it this way: property insurance rebuilds your facility, but business interruption insurance keeps you solvent while that happens. This can be the difference between a temporary setback and permanent closure.
Cyber liability insurance is entering a new phase in 2026 as digital threats evolve rapidly. Data breaches and ransomware attacks can devastate your finances and reputation. As more manufacturers integrate technology into operations—from automated production systems to cloud-based inventory management—cyber insurance has shifted from optional to essential. The market is seeing measured rate increases and risk-based pricing, so securing coverage before an incident is significantly easier than after.
Commercial umbrella insurance extends your liability protection beyond base policy limits. When equipment malfunctions and causes extensive damage to a client's production facility, umbrella coverage provides that extra layer when claims exceed your standard limits.
Environmental or pollution liability insurance covers cleanup costs, third-party claims, and regulatory fines if your manufacturing process creates pollution through chemical spills, waste disposal, or emissions. If your operations involve any hazardous materials, this isn't truly optional.
When to Add Coverage as Your Business Grows
Your insurance needs change as your manufacturing operation evolves. Here's when to add or increase coverage:
Add workers' compensation immediately when you hire your first employee. Add commercial auto when you purchase or lease your first business vehicle. Add product liability before your first product ships to customers—not after a claim arrives. Add cyber liability when you start collecting customer data digitally, processing online payments, or using cloud-based systems for operations. Add environmental coverage before you begin any manufacturing processes involving chemicals, hazardous materials, or waste that requires special disposal.
Increase your coverage limits when you land larger contracts, expand to new facilities, purchase expensive new equipment, or significantly increase your revenue. Many manufacturers make the mistake of keeping the same coverage limits for years while their business doubles or triples in size. Your insurance should scale with your operations.
Your Annual Insurance Review Checklist
Set a calendar reminder to review your insurance every single year—ideally 60-90 days before renewal. Your renewal isn't just a formality; it's a strategic checkpoint to reassess how your business has changed. Here's what to check:
Inventory all physical and digital assets. Evaluate both manual and automated production aspects. Identify any new regulatory exposures you've taken on. Verify that property insurance reflects the current replacement value of equipment and facilities, including any new equipment purchased during the year. Review whether you've added new products that might need additional product liability or E&O coverage.
Assess workforce changes—if you've hired significantly, your workers' compensation premiums should reflect accurate payroll numbers. Check that your cyber coverage matches the level of technology now embedded in your operations. Review equipment breakdown policies to ensure new machinery is covered. Consider contingent business interruption coverage if you've become more dependent on specific suppliers or clients.
Finally, review your costs. Manufacturing insurance typically ranges from 0.5% to 1.5% of annual revenue. Average costs for general liability run around $782 annually, workers' compensation averages $708 per year, and a bundled Business Owner's Policy averages $454 annually. If your costs are significantly higher, shop around—the market has seen property rates decrease about 15% and general liability rates drop about 13% year over year in 2025, so you might find better pricing.
Getting Started: What to Do Next
Start by gathering documentation of what you currently have. Pull out your existing policies and make a list of your coverage types, limits, deductibles, and annual costs. Then compare that list against this checklist. Identify gaps—coverage you need but don't have, or limits that are too low for your current operations.
Talk to an insurance agent who specializes in manufacturing. Generic business insurance agents often miss the nuances of manufacturing risks—equipment breakdown, product liability for components, pollution from manufacturing processes. A specialized agent will ask better questions and recommend coverage that actually matches your operations.
The bottom line: manufacturing insurance isn't one-size-fits-all, and it's not set-it-and-forget-it. Your coverage should evolve as your business does. Review annually, adjust when major changes happen, and make sure you're protected before problems arise—not after.
