Manufacturers Representative Insurance Policy Information
Manufacturers Representative Insurance. Are you thinking about starting up a manufacturers representative business? If so, you want to make sure that you cover all of your bases and properly prepare yourself so that you can enjoy as much success as possible.
Commission merchants or manufacturers' representatives arrange the sales of products and commodities for a fee or a commission based on a percentage of the sales. They can act on behalf of one or more foreign or domestic manufacturers.
They do not take physical possession of the goods, which can include any item made for individual or commercial consumers, from small novelty items to motor vehicles.
As with any wholesale or distribution business, there are a lot of factors that need to be taken into consideration when establishing a commission merchant wholesale and distribution company.
Of all the different things you need to attend to, there's something that should be high on your list of priorities: making sure you invest in the right type of manufacturers representative insurance coverage.
Manufacturers representative insurance protects your business from lawsuits with rates as low as $47/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked manufacturers rep insurance questions:
- What Is Manufacturers Representative Insurance?
- How Much Does Manufacturers Representative Insurance Cost?
- Why Do Manufacturers Representatives Need Insurance?
- What Type Of Insurance Do Manufacturers Representatives Need?
- What Does Manufacturers Representative Insurance Cover & Pay For?
What Is Manufacturers Representative Insurance?
Manufacturers Representative Insurance is a type of insurance coverage specifically designed for manufacturers' representatives or agents who represent one or more manufacturers and sell their products.
This insurance provides protection for the representatives in the event of a lawsuit or claim arising from their sales activities, such as product liability, errors and omissions, or breach of contract.
The policy typically covers legal fees, settlements, and judgments related to the representatives' business activities. This type of insurance is important for manufacturers' representatives to protect their personal assets and to ensure they can continue to operate their business without financial stress in the event of a legal dispute.
How Much Does Manufacturers Representative Insurance Cost?
The average price of a standard $1,000,000/$2,000,000 General Liability Insurance policy for small manufacturers representative businesses ranges from $47 to $79 per month based on location, size, revenue, claims history and more.
Why Do Manufacturers Representatives Need Insurance?
Just like any other wholesale business, manufacturers reps face a variety of risks. These risks can include:
- Property damage
- Personal injury
- Employee-related injuries and illnesses
- Legal disputes
These are just some of the issues that you could end up facing in your industry. When problems arise, as the owner of your manufacturers rep business, you are financially responsible. That means that any damages, medical expenses, and legal fees that need to be paid are your obligation.
Those costs can be exorbitant, and if you have to pay for them out of your own pocket, you could be facing serious financial fallout. If you're insured, however, your carrier will cover those expenses for you.
In other words, manufacturers representative insurance acts as a financial security blanket, protecting you from having to pay high costs that could cause serious trouble for your commission merchant business.
What Type Of Insurance Do Manufacturers Representatives Need?
The specific type of coverage you need as a manufacturers rep depends on several factors that are unique to your business; however, there are certain manufacturers representative insurance policies that every commission merchant in this industry will need, regardless of the specifics of their operations:
- Commercial General Liability - This type of coverage offers protection against third-party persona injury, advertising injury, and property damage claims.
- Commercial Property - With this policy, the physical structure of your business, as well as the contents housed inside of it, are covered from acts of nature, such as fire and damage, vandalism, and theft.
- Workers Compensation - Your employees need to be covered, too, and workers' comp pays for any medical expenses and lost wages that may arise if a staff member suffers a work-related illness or injury.
- Commercial Auto - If you used any vehicles for work-related purposes, commercial auto insurance will cover the cost of any damages, should a vehicle be involved in an accident.
These are just some of the types of manufacturers representative insurance coverage you should carry. You can carry individual policies, or opt for a commercial package policy that combines several different types of coverage under a single policy.
Manufacturers Representative's Risks & Exposures
Premises liability exposure is limited to that of an office with very limited public access. There may be considerable international exposure if the owner and/or employees are in other countries for a significant length of time meeting with clients.
An international liability policy may be required to adequately protect the firm for actions outside the United States.
Products liability exposure is low if products are all from domestic manufacturers because the commission merchant will never touch the product. If products are from foreign manufacturers, the commission merchant's liability will be increased to that of a manufacturer, particularly if the manufacturer does not have a U.S. policy.
The merchant may need an international products liability policy to provide adequate coverage. The merchant should request copies of policies from each manufacturer with whom they do business to determine the extent of coverage provided. Hazards depend on the type of products sold, the warranties, advertising, commitments, and promises made by the commission merchant.
Workers compensation exposure is generally limited to office and travel hazards. When work is done on computers, employees are exposed to eyestrain, neck strain, and repetitive motion injuries including carpal tunnel syndrome. All workstations should be ergonomically designed.
Cleaning workers can develop respiratory ailments or contact dermatitis from working with chemicals. Salespersons can be injured in on-the-road or airplane accidents, or while making calls overseas. Foreign voluntary workers compensation may be needed if out-of-country travel is more than incidental.
Property exposure is minimal as the merchant takes no physical possession of the goods that are sold. Generally, there is an office and some salespersons' samples. Ignition sources would be limited to electrical wiring, heating and air conditioning systems.
Inland marine exposure is from accounts receivable if the merchant offers credit to customers, computers for tracking sales, salespersons' samples for goods used in product demonstrations, and valuable papers and records for manufacturers' and customers' information.
Although commission merchants may arrange for shipment, they will not take possession of the goods so have no goods in transit exposure.
Crime exposure is from employee dishonesty. Background checks, including criminal history, should be performed on all employees handling money. There must be a separation of duties between persons handling deposits and disbursements and reconciling bank statements.
Regular audits, both internal and external, are important to prevent employee theft of accounts. Since international banking can be involved, the audit of the books should be more extensive due to the opportunity for unusual transactions or diversions, including offshore banking.
Business auto exposure is moderate for the salespersons' fleet. There should be a written policy on personal and permissive use of any vehicles provided to employees.
MVRs must be ordered on a regular basis. Vehicles must be well maintained with records kept at a central location.
What Does Manufacturers Representative Insurance Cover & Pay For?
Manufacturers' representatives can face a variety of legal challenges in the course of their business operations. Here are five reasons they may be sued and how insurance can help protect them:
Breach of contract: Manufacturers' representatives may be sued for failing to fulfill the terms of their contracts with manufacturers or clients. This can include failure to meet sales targets or not providing adequate support and service.
Insurance Solution: Professional liability insurance (also known as errors and omissions insurance) can help protect representatives from legal expenses and potential financial losses in case of a breach of contract lawsuit. This type of insurance covers the cost of defense, settlements, and judgments.
Negligence: If a representative is accused of negligence in the performance of their duties, such as providing incorrect information or not properly handling client concerns, they could face legal action.
Insurance Solution: Professional liability insurance can also cover negligence claims, protecting representatives from financial consequences and legal fees associated with defending against such allegations.
Product liability: If a product represented by the manufacturer's representative causes injury or property damage, they can be held liable, along with the manufacturer.
Insurance Solution: Product liability insurance helps protect manufacturers' representatives from claims related to defective or unsafe products. This coverage can pay for legal defense, settlements, and judgments stemming from product-related lawsuits.
Intellectual property infringement: Representatives may be sued if they are accused of infringing on a third party's intellectual property rights, such as patents, trademarks, or copyrights.
Insurance Solution: Intellectual property insurance can help cover the costs associated with defending against these types of claims, including legal fees and potential damages awarded in a lawsuit.
Employment practices liability: If a manufacturers' representative is accused of improper employment practices, such as discrimination, wrongful termination, or harassment, they may face legal action.
Insurance Solution: Employment practices liability insurance (EPLI) helps protect businesses, including manufacturers' representatives, from claims related to employment-related issues. This coverage can pay for legal defense, settlements, and judgments resulting from employment practices lawsuits.
In summary, a variety of insurance solutions can help protect manufacturers' representatives from potential lawsuits, including professional liability, product liability, intellectual property, and employment practices liability insurance. These policies can help cover legal fees, settlements, and judgments that may arise from various legal challenges faced by representatives in their line of work.
Commercial Insurance And Business Industry Classification
- SIC CODE: 5099 Durable Goods, Not Elsewhere Classified, 5199 Nondurable Goods, Not Elsewhere Classified
- NAICS CODE: 423990 Other Miscellaneous Durable Goods Merchant Wholesalers, 424990 Other Miscellaneous Nondurable Goods Merchant Wholesalers
- Suggested Workers Compensation Code(s): 8742 Salespersons or Collectors - Outside
Description for 5099: Durable Goods, Not Elsewhere Classified
Division F: Wholesale Trade | Major Group 50: Wholesale Trade-durable Goods | Industry Group 509: Miscellaneous Durable Goods
5099 Durable Goods, Not Elsewhere Classified: Establishments primarily engaged in the wholesale distribution of durable goods, not elsewhere classified, such as musical instruments and forest products, except lumber.
- Ammunition, except sporting-wholesale
- Cassettes, prerecorded: audio-wholesale
- Fire extinguishers-wholesale
- Firearms, except sporting-wholesale
- Game machines, coin-operated-wholesale
- Gas lighting fixtures-wholesale
- Logs, hewn ties, posts, and poles-wholesale
- Machine guns-wholesale
- Monuments and grave markers-wholesale
- Musical instruments-wholesale
- Phonograph records-wholesale
- Signs, except electric-wholesale
- Tapes, audio prerecorded-wholesale
- Timber products, rough-wholesale
- Wood chips-wholesale
Description for 5199: Nondurable Goods, Not Elsewhere Classified
Division F: Wholesale Trade | Major Group 51: Wholesale Trade-non-durable Goods | Industry Group 519: Miscellaneous Non-durable Goods
5199 Nondurable Goods, Not Elsewhere Classified: Establishments primarily engaged in the wholesale distribution of non-durable goods, not elsewhere classified, such as art goods, industrial yarns, textile bags, and bagging and burlap.
- Advertising specialties-wholesale
- Art goods-wholesale
- Bags, textile-wholesale
- Baskets: reed, rattan, willow, and wood-wholesale
- Broom, mop, and paint handles-wholesale
- Canvas products-wholesale
- Chamois leather-wholesale
- Christmas trees, including artificial-wholesale
- Clothes hampers-wholesale
- Cotton yarns-wholesale
- Fish, tropical-wholesale
- Foam rubber-wholesale
- Furs, dressed-wholesale
- Gifts and novelties-wholesale
- Glassware, novelty-wholesale
- Greases, animal and vegetable-wholesale
- Ice, manufactured or natural-wholesale
- Industrial yarn-wholesale
- Jewelry boxes-wholesale
- Leather and cut stock-wholesale
- Leather goods, except footwear, gloves, luggage, and
- Lighters, cigar and cigarette-wholesale
- Linseed oil-wholesale
- Novelties, paper-wholesale
- Oils, except cooking: animal and vegetable-wholesale
- Oilseed cake and meal-wholesale
- Pet supplies, except pet food-wholesale
- Pipes, smokers'-wholesale
- Plant food-wholesale
- Plastics foam-wholesale
- Rayon yarns-wholesale
- Rubber, crude-wholesale
- Sheet music-wholesale
- Silk yarns-wholesale
- Vegetable cake and meal-wholesale
- Wood carvings-wholesale
- Woolen and worsted yarns-wholesale
Manufacturers Representative Insurance - The Bottom Line
Not all manufacturers representative insurance polices have the same coverage, limits, exclusions and endorsements. If you are shopping for business insurance, or want to see if your current coverage is good enough, speak to a professional insurance broker to take a look at your business.
In many cases they can save you premium dollars and offer you better policy options than you currently have.
Additional Resources For Wholesale And Distribution Insurance
Read informative articles on wholesale distribution insurance. Distributors and wholesalers face specific risks including fire, flood and weather damage that can destroy products in the distribution center - and every part of the supply chain including late supplier shipments to unpaid invoices - can effect the entire operation.
- Air Conditioning And Heating
- Audio And Video Equipment
- Beer & Ale
- Cameras & Musical Instruments
- CDs, DVDs And Videos
- Dairy Products
- Dry Goods
- Electrical Appliances
- Electrical Equipment
- Electrical Supplies
- Electronic Equipment
- Greeting Cards
- Importer & Exporter
- Liquor Wholesaler
- Manufacturers Representative
- Motion Picture
- Plate Glass
- Plumbing Supplies
- Restaurant Equipment
- Roofing Materials
- Seed Merchants
- Theatrical Supplies
- Wholesale Florist
- Wholesaler Distributor
- Specialty Dealers And Distributors
The wholesale distribution industry plays a crucial role in the supply chain process, connecting manufacturers and retailers to customers. It involves the storage, transportation, and distribution of a wide range of products, including raw materials, finished goods, and equipment.
Wholesale and distribution operations have many of the same physical damage and property coverage concerns as warehouse operations. In both, the value of both real property and stocks of merchandise is very high. Loss control and other techniques appropriate to the types of merchandise involved are needed. For these reasons, adequate and appropriate property insurance coverages are important.
As with any business, the wholesale distribution industry is exposed to a variety of risks that can impact its operations and profitability. These risks can range from property damage and theft to liability claims and employee injuries.
Business insurance helps to protect a wholesale distribution company from these potential losses by providing financial protection in the event of unexpected events. It helps to cover the costs of repairs, replacements, and legal fees, as well as lost income and wages.
For example, if a warehouse fire destroys a large portion of a wholesale distributor's inventory, business insurance can help to cover the cost of replacing the lost goods and repairing the damaged property. Similarly, if a customer is injured on the company's premises, liability insurance can help to cover the cost of legal fees and settlement payments.
In addition to protecting the company's assets and financial stability, commercial insurance also helps to protect the company's reputation. If a company is sued or faces a major loss, it can damage its reputation and credibility in the industry. Business insurance helps to mitigate these risks and maintain a positive reputation.
Overall, the wholesale distribution industry needs business commercial insurance to protect against unexpected risks and losses, maintain financial stability, and protect the company's reputation. Without it, a company may face significant financial losses and potential legal liabilities that could impact its operations and profitability.
Minimum recommended small business insurance coverage: Business Personal Property, Business Income and Extra Expense, Accounts Receivable, Computers, Contractors' Equipment, Goods in Transit, Valuable Papers and Records, Employee Dishonesty, General Liability, Employee Benefits, Umbrella, Business Automobile Liability and Physical Damage, Hired and Non-owned Auto & Workers Compensation
Other commercial insurance policies to consider: Building, Earthquake, Equipment Breakdown, Flood, Leasehold Interest, Real Property Legal Liability, Signs, Computer Fraud, Forgery, Money and Securities, Cyberliability, Employment-Related Practices and Stop Gap Liability.