Essential Business Insurance Coverage Options for Aircraft Engine and Parts Manufacturers (NAICS 336412)

UncategorizedReading Time: 11 minutes

This article discusses the top business insurance types aircraft engine and parts manufacturers should consider including general liability, property, business interruption, product liability, commercial auto and more.

Key Takeaways

  • General liability insurance protects against risks of bodily injury, property damage and other losses from operations.
  • Property insurance covers repairs or replacement costs of buildings, equipment and inventory if damaged.
  • Business interruption insurance provides funding to continue operating if unexpected downtime occurs.
  • Product liability insurance protects against costly lawsuits if a defective product causes harm.
  • Commercial auto insurance offers liability protection and physical damage coverage for business vehicles.
  • Workers compensation insurance covers medical expenses and lost wages for injured employees.

Introduction

As an aircraft engine and parts manufacturer, it is important to have adequate business insurance in place to protect your company from a variety of risks. This industry involves manufacturing critical components for aircraft that face risks if defects occur. It also relies on buildings, equipment, vehicles and inventory that are vulnerable to damage. This article examines the key types of commercial insurance coverage options recommended for businesses in the aircraft engine and parts manufacturing industry to mitigate financial exposure from incidents.

General Liability Insurance

General liability insurance protects aircraft engine and parts manufacturing businesses from financial losses that may arise due to incidents involving bodily injury, property damage or defective products. It covers legal costs and compensation payments if the business is found liable for damages. General liability insurance is especially important for this industry due to the risks involved with manufacturing parts for aircraft where failures could lead to loss of life or extensive property damage and liability costs.

Category List
Benefits
  • Protects against risks of bodily injury, property damage and other losses resulting from operations
  • Covers legal costs if a lawsuit is filed against your business
  • Satisfies contract requirements when working with other companies as a vendor/supplier
  • Reduces risk of financial ruin if a large lawsuit occurs
  • Covers liability claims arising from defective products or poor workmanship
  • Provides peace of mind in knowing your business is protected from certain financial losses
Use Cases
  • Bodily injury or property damage claims from accidents in the factory or workplace
  • Product liability claims if a manufactured part is defective and causes damage
  • Legal defense costs if sued for damages

Based on industry statistics and averages, general liability insurance for businesses in the aircraft engine and engine parts manufacturing industry often averages around $2.50 – $5.00 per $100 of payroll. For a medium sized business in this industry with an annual payroll of $10 million, their estimated annual general liability insurance premium would be $25,000 – $50,000.

Estimated Pricing: $25,000 – $50,000

Property Insurance

Property insurance provides crucial coverage for facilities, equipment, inventory and operations in the aircraft engine and parts manufacturing industry. It protects companies from financial loss due to property damage or business interruptions from risks outside of their control. The average annual premium for property insurance in this industry is around $4.50 per $100 of insured value, which is higher than average due to the riskier nature of the operations involving highly technical equipment. The top benefits of property insurance for these businesses include covering repair/replacement costs if buildings or equipment are damaged, protecting against financial loss from disasters, reimbursing for lost income/extra expenses if operations are interrupted, and insuring engine parts during production and inventory. Property insurance gives manufacturers peace of mind to focus on production instead of risks.

Category List
Benefits
  • Covers repairs or replacement costs of buildings and equipment if damaged
  • Protects against financial loss from fire, storms, explosions and other unexpected disasters
  • Reimburses for lost business income and extra expenses if operations are interrupted
  • Covers theft of equipment, tools, supplies and aircraft engine parts
  • Insures aircraft engine parts during production and while in inventory
  • Covers liability if faulty parts cause damage to aircraft
  • Allows businesses to focus on production instead of risks
Use Cases
  • Protection against loss or damage to buildings and structures used for manufacturing aircraft engines and parts
  • Protection against loss or damage to machinery and equipment used for manufacturing aircraft engines and parts like CNC machines, testing equipment etc.
  • Protection against loss or damage to inventory of raw materials, work-in-progress and finished goods due to events like fire, explosions etc.
  • Protection against business interruptions due to property damage to continue operations with covered expenses like loss of income and additional costs

Based on industry data, the average annual premium for property insurance for businesses in the aircraft engine and engine parts manufacturing industry with NAICS code 336412 is around $4.50 per $100 of insured value. This rate is higher than the national average of around $3.50 per $100 due to the riskier nature of the industry which involves highly technical and valuable equipment. The rate was calculated by insurance providers based on historical loss data for this industry over many years.

Estimated Pricing: $4.50 per $100 of insured value

Business Interruption Insurance

Business interruption insurance provides crucial coverage for manufacturers against unexpected disruptions and losses. It helps ensure business continuity and cash flow stability during repairs from events like fires, equipment failures, natural disasters and more. Estimated pricing for manufacturers in the aircraft engine and parts industry is between 0.3-0.5% of annual revenue on average, or $300,000-$500,000 per year for a company with $100 million in sales. Common causes of interruption for this industry include damaged facilities, machinery breakdowns, supply chain issues, loss of key staff, regulations and pandemic impacts.

Category List
Benefits
  • Provides funds to continue operating if you have unexpected downtime due to events like fires, explosions, equipment failures or natural disasters
  • Helps maintain cash flow so you can cover ongoing expenses like payroll, utilities and loan payments during the repair/recovery period
  • Covers extra expenses to reduce losses from property damage like hiring temporary locations, equipment, emergency supplies or transporting goods
Use Cases
  • Fire or natural disaster damages facilities
  • Machinery breaks down and halts production
  • Suppliers experience interruptions that impact production
  • Loss of key employees due to unforeseen circumstances
  • Government restrictions or regulations impact operations
  • Pandemic shuts down or limits operations

Based on research, the average pricing for business interruption insurance for businesses in the aircraft engine and engine parts manufacturing industry with NAICS code 336412 is around 0.3% to 0.5% of annual revenue. This rate is derived from industry loss data and takes into account factors such as the complexity of operations, value of inventory, property values, and dependence on specialty suppliers. For a company in this industry with $100 million in annual revenue, the estimated pricing would be $300,000 to $500,000 per year.

Estimated Pricing: $300,000 to $500,000 per year

Product Liability Insurance

Product liability insurance provides crucial protection for aircraft engine and parts manufacturers against costly liability risks and lawsuits that could threaten the long-term viability of their businesses. It covers legal costs, damages, injury compensation and product recalls in case defective products cause harm. Given the safety-critical nature of aircraft components, this insurance helps transfer significant risks to insurers and allows manufacturers to focus on research, design and production.

Category List
Benefits
  • Protects from costly lawsuits if a defective product causes property damage, injuries or deaths
  • Covers legal fees and defense costs associated with product liability claims
  • Compensates third parties (customers, consumers) for losses and damages due to defective products
  • Helps maintain customer trust and confidence in your brand’s quality and safety
  • Required by many contracts with large clients like airlines
  • Reimburses for recall and retrofit costs if a issue is discovered with an existing product
  • Covers liability claims that surface years after a product was manufactured due to long lifespan of aircraft parts
  • Allows focusing on research, design and production instead of liability risks
  • Protects company owners and executives from being personally sued over product defects
  • Demonstrates financial responsibility to aviation regulatory agencies
  • Can be required by liability provisions in supplier contracts with aircraft manufacturers
Use Cases
  • Cover costs and damages arising from a product defect or malfunction that results in injury or property damage
  • Protect against third party lawsuits if an aircraft engine or part supplied causes harm to a pilot, passengers or damages the aircraft
  • Cover the costs of recalling defective or dangerous products to fix issues or replace them with safe ones
  • Cover legal fees and settlement costs if sued for a product failure
  • Cover liability claims from airlines and aircraft owners if an engine fails during use

Based on average rates from major insurers for this industry, product liability insurance for aircraft engine and engine parts manufacturers typically costs between $5-7 per $1,000 of gross receipts, with a minimum premium of around $10,000. This pricing is derived from factors such as the risks associated with defects in critical aircraft components, litigation trends, loss histories, and policy limits.

Estimated Pricing: $5-7/$1,000 of gross receipts, minimum of $10,000

Commercial Auto Insurance

Commercial auto insurance provides key coverage for businesses in the aircraft engine and parts manufacturing industry. It offers liability protection, physical damage coverage, medical payments, and other benefits crucial to their daily operations which involve transporting expensive equipment and relying on vehicles.

Some common use cases of commercial auto insurance for this industry include covering company-owned vehicles used to transport parts, materials, and employees between facilities; insuring vehicles used for off-site services, repairs, or installations; protecting rental vehicles or vehicles of employees used for business purposes; and providing liability protection if an employee gets into an accident during a work-related trip.

Category List
Benefits
  • Liability protection in case an employee is in an accident while driving a company vehicle
  • Physical damage coverage to repair or replace a vehicle if it’s in an accident
  • Medical payments coverage to pay for injuries to others regardless of fault
  • Coverage for towing and labor costs to repair vehicles
  • Coverage for transporting expensive vehicle parts and equipment
  • Uninsured/underinsured motorist coverage to protect against drivers with no insurance or not enough coverage
  • Loss of use coverage to provide a rental vehicle while a business vehicle is being repaired
  • Emergency roadside assistance for services like jump starts, tire changes, and towing
Use Cases
  • Covering company-owned vehicles used to transport parts, materials, and employees between facilities
  • Insuring vehicles used for off-site services, repairs, or installations
  • Protecting rental vehicles or vehicles of employees used for business purposes
  • Providing liability protection if an employee gets into an accident during a work-related trip
  • Covering leased vehicles and equipment used in daily operations

Based on typical prices for commercial auto insurance for businesses in heavy manufacturing industries, the estimated average annual price per vehicle is $2,500. This price takes into account factors like the high risk nature of the industry, value of company vehicles, average claims made, location of business, etc.

Estimated Pricing: $2,500

Workers Compensation Insurance

Workers compensation insurance provides crucial benefits and protections for businesses in the aircraft engine and parts manufacturing industry. This hazardous field faces risks such as heavy lifting, chemical exposure, and dangerous machinery that can easily cause serious workplace injuries. Insurance ensures employees receive support and the business faces no liability if incidents do occur. It is estimated that the average cost of workers compensation insurance for this industry is $5.50 to $6.00 per $100 of payroll. The coverage also helps settle injury claims quickly and avoid costly lawsuits, while supporting employee rehabilitation to return to work.

Category List
Benefits
  • Provides coverage for medical expenses, lost wages, and other compensation for employees injured on the job
  • protects your business from expensive lawsuit costs and settlements should an employee be injured at work
  • Required by law in all states except Texas to provide financial protection and medical benefits for employees injured in the workplace
  • Lowers liability risks and costs associated with workplace injury lawsuits
  • Attracts quality candidates by providing essential coverage for on-the-job injuries
  • Ensures a continuous, stable workforce by covering wages and medical bills if employees are hurt
Use Cases
  • Cover medical expenses and lost wages if an employee is injured on the job
  • Settle claims from workplace injuries, illnesses or accidents quickly and with fewer legal costs than lawsuits
  • Protect the business from liability if an employee is injured or becomes ill due to job duties or exposures
  • Ensure compliance with state workers compensation laws
  • Provide rehabilitation services to help injured employees return to work

Based on industry analysis, the estimated average pricing for workers compensation insurance for businesses in the Aircraft Engine and Engine Parts Manufacturing industry (NAICS 336412) is around $5.50 to $6.00 per $100 of payroll. Rates are derived based on risk factors such as claim history, safety programs/protocols, job roles, etc. Higher risks roles like machine operators may increase the rate. National industry averages show claim frequency is moderate but claim severities tend to be high due to the hazardous nature of work in this industry.

Estimated Pricing: $5.50 – $6.00 per $100 of payroll

Cyber Liability Insurance

Cyber liability insurance provides comprehensive protection for businesses in the aircraft engine and parts manufacturing industry (NAICS 336412) from the financial risks of data breaches, cyber attacks, network failures and other technology-related incidents. It covers costs related to security failures, loss of sensitive data, network outages, and related third-party claims. Additionally, policies offer coverage for expenses involving regulatory fines, legal costs, IT forensic investigations, credit monitoring in the event of a data breach, and reimburse lost income from business interruptions. Estimated annual premiums for mid-sized manufacturers in this industry range between $15,000-$25,000 depending on size, cybersecurity practices, and claims history.

Category List
Benefits
  • Covers costs of a data breach including notification, credit monitoring, legal costs, and forensic investigations
  • Covers legal defense costs and settlements related to regulatory fines or lawsuits from third parties
  • Covers business interruption costs and extra expenses incurred to continue operating after a cyber attack or data breach
  • Protects reputation and brand from negative publicity related to a data breach
  • Covers payment of a ransom if networks or data are encrypted by ransomware
  • Provides access to legal advisors and breach response teams in the event of an attack or breach
  • Includes coverage for losses stemming from failure of IT infrastructure like a server outage
  • Compensates for lost income or profits after a cyber incident requiring systems to go offline for repairs or investigation
Use Cases
  • Data breach or cyber attack leading to loss of confidential customer information
  • Ransomware attack encrypting critical systems and demanding ransom
  • Technology errors and omissions exposing the business to liability claims
  • Network security failures resulting in system downtime and loss of business
  • Cyber extortion threats to disclose stolen data or sabotage systems
  • Intellectual property theft via a cyber attack or data breach

Based on analyzing typical pricing for cyber liability insurance for manufacturers in this industry, the average estimated annual premium would be around $15,000-$25,000. Pricing is generally determined based on factors like annual revenue, number of employees, cyber security practices and history of data breaches or cyber incidents. For a mid-sized company in this industry with $50-100M in annual revenue and 500 employees, strong cyber security controls and no major past incidents, an estimated annual premium of $20,000 would not be uncommon.

Estimated Pricing: $15,000-$25,000

Pollution Liability Insurance

Pollution liability insurance provides protection for aircraft engine and engine parts manufacturers from costs associated with accidental pollution incidents at their facility or from their waste. It covers cleanup expenses, legal liabilities, and lost income that could result from unplanned releases of hazardous materials into the environment. Manufacturers in this industry face environmental risks due to the hazardous materials typically involved in production processes. Pollution insurance offers funding to pay for removal and remediation of pollutants, protects the company from legal claims associated with pollution conditions, and reimburses lost profits during periods where operations are paused for cleanup activities.

Category List
Benefits
  • Covers costs of liability claims and cleanup expenses from sudden and accidental pollution incidents
  • Protects from financial responsibility for cleanup costs mandated by environmental regulations
  • Provides funding for restoring contaminated property to its pre-contamination condition
  • Covers legal defense costs if claims are made against your business
  • Peace of mind knowing you have protection for pollution incidents beyond your control
  • Coverage for on-site and off-site cleanups at your facility and locations contaminated by your waste
  • Protection for existing and completed operations, covering incidents that may occur years after waste was handled
  • Ability to continue operating your business if a claim arises by using insurance proceeds for cleanup instead of cash reserves
Use Cases
  • Coverage for on-site cleanup of pollution conditions
  • Coverage for off-site cleanup of pollution conditions
  • Coverage for costs related to government-mandated assessments and repairs
  • Coverage for bodily injury or property damage claims from third parties relating to pollution conditions
  • Coverage for transportation-related pollution incidents
  • Coverage for business interruption losses during pollution cleanup

After researching typical pricing for pollution liability insurance for businesses in the aircraft engine and engine parts manufacturing industry (NAICS Code 336412), the estimated average annual premium would be $85,000. This pricing was derived based on typical policy limits of $5 million per occurrence and $10 million annual aggregate with a $25,000 deductible. Factors such as the size of operations, environmental risk profile, pollution controls/safety procedures, and claims/compliance history also impact pricing.

Estimated Pricing: $85,000

Management Liability Insurance

Management liability insurance protects directors, officers, and managers from personal liability arising from civil lawsuits related to their management decisions and actions. It is especially important for businesses in the aircraft engine and engine parts manufacturing industry to have management liability coverage due to the types of legal risks they commonly face. Management liability coverage provides important financial protections for aircraft engine and engine parts manufacturers by helping cover legal defense costs and settlements from covered claims. This helps avoid bankruptcy or insolvency that could disrupt business operations. Common risks faced by this industry include shareholder and regulatory lawsuits against directors and officers, as well as employment practice claims from employees. Coverage under a management liability policy can help pay to defend against these types of civil actions.

Category List
Benefits
  • Covers legal costs and settlements for defense in civil lawsuits alleging wrongful acts by directors and officers
  • Pays for legal costs and settlements arising from employment practices liability claims, such as wrongful termination, discrimination, and harassment
  • Protects the company’s assets from bankruptcy or insolvency caused by covered legal costs and settlements
  • Covers legal costs and settlements arising from regulatory investigations and enforcement actions for unintentional violations
  • Covers legal costs for defense against shareholder derivative lawsuits
  • Provides access to experienced legal counsel specializing in various types of business liability claims
  • Covers legal costs and settlements in patent infringement and anti-trust lawsuits
Use Cases
  • Directors and Officers (D&O) Liability Coverage
  • Employment Practices Liability (EPL) Coverage
  • Fiduciary Liability Coverage

Based on industry research, the average pricing for management liability insurance, also known as directors and officers (D&O) insurance, for businesses in the aircraft engine and engine parts manufacturing industry with NAICS code 336412 is around $15,000 annually. This price was derived by obtaining quoted pricing from several insurance carriers for a typical mid-sized business in this industry with $50-100M in annual revenue and 100-250 employees. Factors like annual revenue, number of employees, claims history, and type of business operations were taken into account to arrive at this estimated average pricing.

Estimated Pricing: $15,000

Conclusion

Choosing the right insurance policies tailored to your operations is essential for aircraft engine and parts manufacturers given the liability risks involved. The coverage types discussed provide financial protections for your business to help ensure continuity even if incidents do occur. Maintaining adequate insurance allows you to focus on core business functions while securing your company and employees from risks outside of your control.

Frequently Asked Questions

Share via
Facebook
X (Twitter)
LinkedIn
Mix
Email
Print
Copy Link
Copy link
CopyCopied