5 Questions to Ask Before Your Production Equipment Goes Down
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As a manufacturer or recycler, one of the most important assets, aside from your employees, is the production equipment used in the process of making your final product. Because each piece of equipment plays a vital role in your process, it’s essential to make sure you’re keeping your property insurance policy updated accordingly with the proper replacement cost valuations for this equipment. And, not only do you have to keep in mind the valuation of your equipment, but you also have to review your business income and extra expense limit (BI & EE). This review is necessary to ensure the limit is adequate if one (or more) of your production machines was unavailable for use as a result of a covered loss.
When evaluating the replacement cost of your equipment to ensure that your personal property limits are adequate, keep in mind that the market value of your equipment is often lower than the cost to replace your equipment. Additionally, depending on the complexity of your equipment, the value of your equipment could actually increase over time.
As previously mentioned, the personal property limits aren’t the only portion of your property policy that can be affected by a covered loss to production machinery. There are many other factors to be aware of if one machine goes down, including but not limited to. Ask yourself the following questions before a problem occurs:
- How long will it take to find or rebuild the same piece of equipment? Six months? A year?
- Does it have to be rebuilt completely by a company overseas? Shipping and assembly time must be contemplated.
- Can it be repaired and not replaced? Are parts readily available? Are special technicians required to perform the repair? What’s their availability and timeframe?
- Will there be a bottleneck in the production process? Or can another machine be utilized to perform the same function? Will another shift have to be added to keep up with production?
- Will you have to subcontract the work out to a competitor while your equipment is being repaired or replaced?
All of these questions are important considerations when reviewing the BI & EE limit of your property policy, which contemplates loss of profit, continuing expenses, ordinary payroll and extra expenses you may incur while a piece of production equipment is unavailable.
Having a contingency plan in place utilizing the above questions can be useful in keeping the overall costs of a loss down and returning to normal production. Questions? Discuss this plan with an ‘A’ Team member today.
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