If you are a manufacturer, you are aware of the critical role played by the plant and machinery used in your production processes.
More than ever, financial constraints on investing in new machinery are likely to make maintaining and safeguarding your existing plant and tools with particular care – through the protection of machinery insurance, for instance.
In an article dated the 23rd of October 2017, The Engineer revealed that, because of the uncertainties surrounding Brexit negotiations, a third of manufacturing companies have decided not to increase investment in new plant and machinery at but to hold it at current rates. A further third of manufacturers have shelved plans for any such investment altogether.
With safeguarding your existing plant and machinery likely to be firmly in the spotlight of your manufacturing business insurance, therefore, here are three easy steps for reducing its cost:
- Cover for repair and replacement
- if investment in new plant and machinery is difficult to make, existing equipment needs to be fully insured against loss or damage with machinery insurance;
- a guide produced by the Association of British Insurers (ABI) explains that cover such as this is likely to be on an “indemnity” basis (when any insurance settlement reflects a deduction for the estimated wear and tear or depreciation of your machinery) or “replacement as new”;
- although replacement as new may be the more initially expensive option, if you are already struggling to find investment in new machinery, it may prove the more cost-effective in, the longer term;
- Mitigating risks
- insurance is all about the risk involved in unexpected events resulting in the loss or damage of the machinery essential to your manufacturing business;
- the more you have done to mitigate those risks, the fewer need to be covered, and the cost of your manufacturers’ insurance may be reduced accordingly;
- the identification, assessment and mitigation of those risks, however, is rarely straightforward;
- but some specialist manufacturers’ insurance providers have the expertise and experience to help conduct such an assessment on your behalf – thus helping you save money on the premiums for your machinery insurance;
- Business interruption insurance
- if your capacity for only limited investment in new plant leaves you more reliant on older machinery, there may be a heightened risk of failures and breakdowns;
- in such an event, it is not only the cost of repairing or replacing essential machinery but the loss of revenue whenever production needs to be halted;
- the principles of business interruption insurance are explained in guidance last published by the Chartered Insurance Institute (CII) on the 5th of May 2017, which mentions that the cover is also known as time loss, consequential loss and loss of profits insurance;
- to save money on the business interruption component of your machinery insurance, it is crucial that you give careful thought to the maximum period for which you may need the cover to apply (the longer the period, the higher the premiums, of course);
- equally critical is the maximum loss of earnings (called your Gross Profit) that needs to be protected.
Machinery insurance is likely to be an integral part of your overall manufacturers’ insurance – but the good news is that there are ways of saving money on its cost.