Jynessa Shaffer
Associate Vice President, Business Insurance
Your insurance program reflects a moment in time. As your manufacturing operation grows, modernizes, and becomes more complex, that original plan can drift out of sync.
This misalignment usually happens gradually. Operations change, but coverage often stays tied to an earlier version of the business. The financial impact may not be obvious until a loss shows what insurance covers—and what the business has to handle on its own.
Here are five common signs your coverage might not match how your manufacturing operation runs today.
1. You upgrade equipment, but coverage doesn't keep up
Manufacturing evolves as old equipment is replaced with new machines to meet demand. These upgrades are necessary, but business insurance often gets overlooked until a loan or certificate request brings it up.
Because upgrades happen bit by bit, equipment values often stay the same even as replacement costs rise. After a loss, policies may pay based on outdated schedules, leaving some damaged or destroyed equipment underinsured.
2. Software and AI enter the shop floor
It’s not just physical equipment that’s changing. According to a recent industry report, 68% of manufacturers say AI will be key to staying competitive in 2025. Software and cloud systems are now deeply part of production.
But as technology moves in, cyber risks come with it. A ransomware attack, system outage, or corrupted control software can stop production just like physical damage.
Without coordinating cyber, business interruption, and property coverage, gaps can appear. For example, lost income during a cyber shutdown or equipment damage from a digital failure might not be clearly covered.
3. Production and inventory outgrow your limits
As inventory grows, more value is stored on-site, and higher throughput raises downtime costs. Business interruption and stock coverage might still be in place, but limits based on past volumes can be quickly used up during a disruption.
If production runs at higher capacity and inventory is much larger than when coverage was last set, even a short shutdown can exceed limits. That means insurance might only cover part of the loss.
4. Your facility changes, but insurance isn't updated
Facility changes aren’t just about adding space. Expansions and reconfigurations often bring higher replacement costs and new risks before insurance is reviewed, including:
- Adding a new wing, warehouse, or production area
- Changing production flow or layout
- Installing mechanical systems or specialized equipment
- Upgrading environmental controls or utilities
If these changes aren’t addressed, coverage limits and sublimits might not match what it would actually cost to rebuild after a loss.
5. You rely more on suppliers
Many manufacturers depend on outside suppliers for key parts, linking production to factors beyond their control. Insurance often focuses on on-site losses, while supplier disruptions are assumed covered without review.
Without contingent business interruption coverage, income lost when a key supplier shuts down, has equipment failure, or can’t ship on time might not be covered.
When should you reassess your insurance?
Besides operational changes that suggest underinsurance, it’s smart to review coverage during:
- Moves, expansions, or consolidations of facilities
- Larger contracts or big workload changes
- High-value equipment purchases, especially multiple at once
- Uncertainty about asset values or replacement costs
- New financing, refinancing, or lender documentation requests
- Changes in materials, processes, or waste that could add pollution risks
Reassessment works best when operations, accounting, and leadership share information so asset values and risks are clear and communicated to your agent.
Close the gap before it shows up
Underinsurance usually doesn’t announce itself—it shows up after a loss. Taking time to review your insurance as your operation changes can help make sure you're protected.
Reach out to a Marsh McLennan Agency Arizona representative to see if your coverage still fits your manufacturing operation today.
