Stock & Work-in-Progress (WIP) Insurance for Medical Devices: A Practical UK Guide

Introduction: why WIP risk is different in medical devices

If you manufacture medical devices, your “stock” is rarely just boxes on a shelf. It’s raw materials, specialist components, sub-assemblies, calibration equipment, sterile packaging, labelled units awaiting release, and often high-value items moving between cleanrooms, test labs and third-party partners.

Work-in-progress (WIP) is where many manufacturers are most exposed. A device that is 70% complete may already include expensive parts, long-lead components, and hours of skilled labour. If a fire, flood, theft, power surge or contamination event wipes out that batch, you don’t just lose the materials—you lose time, compliance effort, and the ability to ship.

Stock & WIP insurance is designed to protect that value. But the details matter: how you value WIP, where it’s stored, what “damage” means in a controlled environment, and how insurers treat spoilage, temperature variation, and quality failures.

This guide explains how Stock & WIP insurance typically works for UK medical device manufacturers, what to watch for, and how to put a stronger risk story in front of insurers.

What is Stock & Work-in-Progress insurance?

Stock & WIP insurance is usually arranged as part of a wider Commercial Combined or Property policy. It provides cover for:

• Raw materials (e.g., polymers, metals, chemicals, packaging)
• Components (electronics, sensors, valves, pumps, specialist fasteners)
• Sub-assemblies and partly-finished devices
• Finished goods awaiting dispatch
• Packaging and labelling stock

Depending on the policy, it can also extend to:

• Stock at multiple locations
• Stock in transit (often under a separate Goods in Transit section)
• Stock held at third-party premises (contract manufacturers, sterilisation partners, fulfilment warehouses)

The key is that the policy should reflect how your business actually operates—especially if you use outsourced steps such as sterilisation, cleanroom assembly, calibration, or final packaging.

Why medical device stock is high-risk (and high-value)

Medical device manufacturing has several features that can increase both the likelihood and the cost of a stock/WIP loss:

• Long lead times: a single component shortage can halt production.
• High unit value: devices and assemblies can be expensive even before completion.
• Regulated processes: rework is not always possible if traceability is compromised.
• Controlled environments: cleanrooms, humidity control and ESD protection create additional failure points.
• Temperature sensitivity: adhesives, reagents, batteries, and sterile packaging can be damaged by heat or cold.
• Batch exposure: one incident can affect an entire batch and associated documentation.

Insurers will often ask more questions for medical device risks because losses can escalate quickly—especially if a property incident triggers product recall concerns or delays critical shipments.

What events can Stock & WIP insurance cover?

Cover depends on the wording, but common insured events include:

• Fire, smoke and explosion
• Flood and escape of water (burst pipes, sprinkler discharge)
• Storm damage
• Theft (often subject to security conditions)
• Impact (vehicle strike)
• Accidental damage (if selected)

Some policies can be extended to include:

• Deterioration of stock following insured damage (e.g., power failure caused by a fire)
• Contamination (sometimes limited and heavily underwritten)
• Mechanical or electrical breakdown (usually a separate Engineering policy)

For medical device manufacturers, the biggest gaps often appear around contamination, temperature variation, and process-related spoilage—so it’s worth reviewing those areas closely.

Stock vs WIP: why valuation is the make-or-break detail

A common mistake is to insure “stock” based on what’s in the warehouse, while underestimating the value sitting on benches, in cleanrooms, or mid-process.

How WIP is typically valued

Insurers usually expect WIP to be valued on an agreed basis, such as:

• Cost of raw materials + labour + a proportion of overheads
• Or cost price up to the stage of completion

If you only insure materials, you may be underinsured. If you insure at selling price without agreement, you may face disputes at claim stage.

Why underinsurance hurts

Many property policies apply “average” (a proportional settlement) if sums insured are too low. In simple terms: if you insure for 50% of the true value, you may only receive 50% of the claim.

For medical devices, underinsurance can happen quietly because:

• High-value components are stored in small volumes.
• WIP value rises quickly after specialist labour and testing.
• Stock levels spike before audits, launches, or large orders.

A practical approach is to model your peak exposures: what’s the maximum value of raw materials + WIP + finished goods you could realistically have on site at one time?

Where is your stock? Location and “basis of cover” questions

Insurers will want to know:

• Which sites hold stock and WIP
• Whether you use shared buildings or multi-tenant units
• If you store stock in basements or ground-floor areas
• Whether any stock is held off-site
• Whether you use third-party processors (sterilisation, calibration, packaging)

If you have stock at multiple locations, you may need:

• A blanket sum insured (one pot across all sites)
• Or specified sums per location

Blanket cover can be simpler, but it still needs to be realistic. If one site holds most of the value, insurers may still ask for location splits.

Cleanrooms, contamination and “damage” definitions

In medical device manufacturing, “damage” isn’t always visible. A small contamination event can render WIP unusable, even if the product looks fine.

Insurers may treat contamination in different ways:

• Covered only if it results from an insured event (e.g., smoke from a fire)
• Excluded if it is “gradual”, “process-related” or “inherent vice”
• Covered only up to a sub-limit, with strict conditions

If you rely on cleanrooms, be ready to explain:

• Cleanroom classification and monitoring
• Gowning and access controls
• Environmental controls (HEPA filtration, pressure differentials)
• Cleaning schedules and validation
• How you quarantine and investigate deviations

The clearer your controls, the easier it is to negotiate sensible cover.

Temperature-controlled stock: cold chain and stability risks

Many medical device operations involve temperature-sensitive items:

• Adhesives, resins and coatings
• Batteries and electronics
• Reagents, gels, or diagnostic components
• Sterile packaging materials

If you use fridges/freezers or controlled stores, ask specifically about:

• Deterioration of stock
• Temperature variation
• Failure of public utilities (power outage)

These covers often come with:

• Sub-limits
• Waiting periods (e.g., power must be off for X hours)
• Requirements for alarms, monitoring, and maintenance

If you have temperature mapping and alarm call-out procedures, that can materially improve insurer confidence.

Stock at third-party premises (outsourcing and contract steps)

Medical device supply chains often include third parties:

• Contract manufacturers
• Sterilisation providers
• Calibration/testing labs
• Fulfilment centres

If your stock or WIP sits at a third party, you need to clarify:

• Who is responsible for insurance under the contract?
• Does their policy cover your goods, and on what basis?
• Do you have “customers/suppliers premises” cover under your own policy?

A common approach is to arrange your own cover for goods at third-party premises, then treat the third party’s insurance as secondary. The right answer depends on contract terms and the quality of the third party’s insurance.

Common exclusions and limitations to watch

Stock & WIP cover can look broad until you read the exclusions. Common issues include:

• Wear and tear / gradual deterioration
• Inherent vice (the item’s own tendency to spoil or degrade)
• Faulty workmanship / defective design
• Process losses (scrap, rejects, quality failures)
• Cyber events (if a cyber incident causes physical loss, cover can be complex)
• Unexplained disappearance
• Theft without forcible/violent entry

For medical devices, also check how the policy treats:

• Mould, fungus and bacteria
• Pollution/contamination
• Data and documentation (batch records, device history records)

You may need separate cover for documents, electronic records, or increased cost of working if a loss forces you to rebuild compliance evidence.

Claims: what insurers will ask for after a stock/WIP loss

In a claim, insurers typically want evidence of:

• The cause of loss (fire report, water damage source, CCTV)
• Stock records (inventory systems, batch logs)
• Valuation basis (cost build-up, labour rates, overhead allocation)
• Proof of ownership (purchase orders, invoices)
• Disposal and salvage records

For WIP, it helps to have:

• Bill of materials (BOM)
• Batch travellers / route cards
• Time booking or labour allocation
• Stage-of-completion records

If your documentation is strong, claims are usually faster and less disputed.

How to reduce risk (and often improve terms)

Insurers price stock/WIP risk based on both exposure and control. Practical improvements that often help include:

• Compartmentation and fire separation between storage and production
• Sprinklers or enhanced detection (especially where high values exist)
• Leak detection and good housekeeping to reduce escape-of-water losses
• Security upgrades (monitored alarms, access control, CCTV, secure cages)
• Temperature monitoring with alerts and documented response procedures
• Supplier resilience (dual sourcing for critical components)
• Clear quarantine and deviation processes to reduce contamination escalation

Even small changes—like moving high-value components off the floor, or installing water leak sensors—can reduce the severity of common losses.

Choosing the right sums insured: a simple checklist

Before renewal, build a clear picture of your maximum exposure:

• Peak raw material value on site
• Peak component value (especially long-lead items)
• Peak WIP value (by department or process stage)
• Peak finished goods value
• Stock at third-party premises
• Stock in transit (if you want it included)

Then confirm:

• The valuation basis (cost vs selling price)
• Any seasonal spikes (launches, audits, large orders)
• Whether you need a declaration-linked policy (useful if values fluctuate)

How Stock & WIP cover fits with other key policies

Stock & WIP cover is rarely standalone. For medical device manufacturers, it often sits alongside:

• Business Interruption (BI): covers lost gross profit and extra costs after insured damage. If you lose WIP, BI can be the difference between a setback and a crisis.
• Engineering/Equipment Breakdown: covers sudden breakdown of plant, compressors, cleanroom systems, and sometimes resulting stock deterioration.
• Goods in Transit: covers stock moving between sites and partners.
• Product Liability and Product Recall: separate covers for third-party injury/property damage and recall costs.
• Cyber Insurance: if systems disruption affects production, dispatch, or traceability.

A joined-up programme avoids gaps where one policy assumes another will respond.

FAQs: Stock & WIP insurance for medical device manufacturers

Does Stock & WIP insurance cover product recalls?

Usually not. Stock & WIP cover is aimed at physical loss or damage at your premises (or specified locations). Product recall is typically a separate policy section or standalone cover.

Is contamination covered?

Sometimes, but often only when contamination results from an insured event (like smoke damage), and it may be subject to sub-limits. Contamination arising from process failures is commonly excluded.

We store components at a sterilisation partner—are we covered?

Only if your policy includes cover for goods at third-party premises (often called customers’/suppliers’ premises). Otherwise, you may be relying on the partner’s insurance, which may not fully match your exposure.

How do insurers treat WIP valuation?

Most insurers want WIP valued at cost to the stage of completion (materials + labour + overhead). Agree the basis upfront and keep records that support it.

Do we need a separate policy for temperature-controlled stock?

Not always, but you may need specific extensions for deterioration of stock, temperature variation, and failure of public utilities. These are commonly limited and require monitoring and maintenance controls.

What’s the biggest mistake manufacturers make?

Underinsuring WIP and not mapping where value sits across the process. The second biggest is assuming third-party locations are automatically covered.

A simple next step

If you’d like, I can help you sanity-check your Stock & WIP sums insured and the key extensions you should ask for (contamination, deterioration, third-party premises, and transit). If you tell me:

• Your main processes (assembly, sterilisation, calibration, packaging)
• Whether you use cleanrooms and temperature-controlled storage
• Any third-party steps

…I’ll outline a clear insurance checklist you can send to your broker or underwriter.

Need cover advice for a specific medical device operation? Speak to a specialist commercial insurance broker who understands regulated manufacturing, supply chain risk and UK compliance requirements.