Supply Chain Disruption Coverage for Metal Manufacturers

Businesses need stability to thrive: a reliable workforce, secure finances, and a way to get products to market. It takes a lot to stay open for business, and many have dependencies on factors that are well outside of their immediate control. Disasters can wreak havoc on open hours, strikes can disturb deliveries, and a whole host of factors can interrupt supply chains.

In today’s global economy, those supply chains can stretch around the world.

Business interruption insurance can help you pay business expenses such as taxes and payroll if you ever need to shut down due to a covered event. But what happens if a key supplier is the one impacted instead?

You might need an additional policy to cover supply chain disruptions, which can be especially damaging to metal manufacturers.

What is business interruption insurance?

Business interruption insurance is frequently bundled with commercial property and business liability coverage under your Business Owners Policy (BOP). It is designed to help your business pay major expenses even when you aren’t open as a result of a covered disaster.

For example, if the building housing your metal manufacturing business is damaged by a covered event like a fire or a tornado, you’ll need to close for repairs. You will still be expected to continue to pay expenses such as your business taxes and suppliers—even if there’s no money coming in because you are closed.

You may have even lost orders that had been fulfilled but not yet shipped out, or had your raw materials wiped out. All of these are expenses that will need to be covered, even though your ability to do business has stopped.

Business interruption insurance can help you to pay those expenses.

What does business interruption insurance cover?

Business interruption insurance covers expenses that you’ll need to pay when it is your property that is damaged by a covered event, leaving you unable to operate your business.

This is an important distinction, because the things that can stop your business from functioning are not always a result of an event that damages your property.

For example, if your metal manufacturing business relies on raw materials from overseas and something happens to damage the production site, halting mining operations, you might not be able to continue producing goods. Business interruption insurance only kicks in if your business is directly impacted by a covered peril, not if a supplier experiences one. Business interruption insurance does not cover third parties.

What are contingent business interruption and supply chain disruption coverages?

Contingent business interruption coverage is designed to help businesses with complex supply chains that depend heavily on others. In the event that a major supplier experiences a covered peril that shuts down their operations, contingent business interruption coverage helps to cover your business losses that result from the event that affected a third party (your supplier).

This type of coverage is typically limited to physical damage of the third party’s property, and does not protect your business from a variety of other possible factors that can affect your supply chain.

Additionally, when you apply for contingent business interruption coverage, you may need to provide your insurance provider with significant details about your suppliers, such as where they are located. This means that any time your suppliers change, you are required to update your policy.

Supply chain disruption coverage is similar to contingent business interruption coverage in that it covers third-party impacts to your business. But a supply chain disruption policy covers a much broader range of potential events that could harm your business.

In addition to damage to your supplier’s physical location, this form of insurance includes other potential business impacts. Events such as labor strikes, major infrastructure issues like bridge or road closures that result in delays or cancellations, and civil unrest are typically covered as part of this type of policy.

Who needs supply chain disruption coverage?

Metal manufacturers depend on a complex supply chain. Raw materials may be mined in one area, smelted and then refined in another, and then machined in yet another. These steps may be located at multiple facilities in a single country, or each stage could happen in a different country, and at different companies.

With a multistep production process, metal manufacturing companies have a lot to pay attention to when examining the strength and resilience of their supply chains.  

Political stability, investments in infrastructure, and the potential for natural disasters are all important considerations when you look at the countries in which your suppliers are located.

When thinking about supply chain disruption coverage, you may want to consider the next level too. How diversified are your suppliers, and what happens if they are unable to secure product?

Because metal manufacturing requires mining natural materials and then refinement, understanding the full process—before the materials you need arrive at your warehouse—is essential to securing the correct insurance coverage.

With multiple global interdependencies, supply chain disruption coverage makes sense for metal manufacturers.

It can take a long time to recover from a supply chain interruption, and businesses that rely on a single supplier or dedicated resource are particularly vulnerable. This is even more the case if you are sourcing raw materials or components from an overseas distributor, as many metal manufacturers do. Having the right insurance coverage is essential.

If you want to learn more about supply chain disruption coverage for metal manufacturers, contact the experts at Rate Insurance. With access to an extensive range of commercial insurance products, they will be able to help you determine if supply chain disruption coverage is necessary for your metal manufacturing business, and then find the right policy to meet your business’s unique needs.

Disclaimer:

All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Rate Insurance does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Rate Insurance. Rate Insurance, its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.