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AVOID THE GAPS THAT CAUSE CLAIMS TO FAIL
Why Exclusions Matter for Manufacturers
Most manufacturing insurance claims don’t fail because “you had no insurance”. They fail because of a detail: a missing extension, an excluded activity, an uninsured contract term, an incorrect territory, an underinsured value, or a misunderstanding about what triggers cover. This page highlights the most common exclusions and policy gaps we see for engineering and manufacturing businesses — and how Insure24 helps you close them.
Common Exclusions & Policy Gaps (UK Engineering & Manufacturing)
Insurance for manufacturers is normally built from multiple sections: property (buildings/contents/stock), engineering (machinery breakdown), business interruption (BI), employers’ liability, public & products liability, and often specialist add-ons such as professional indemnity, product recall, cyber, goods in transit, and contract works/installation.
Each section has exclusions — some are standard, some are negotiable, and some need to be managed through risk control or contract wording. The point of this page is not to replace your policy documents. It’s to help you spot the “usual suspects” so you can ask the right questions and avoid discovering a gap when a loss happens.
If you want a quick review, Insure24 can sanity-check your current cover against your operations: what you make, how you test, where you install, where you export, and what your contracts require. Most gaps can be fixed — but only if they’re identified early.
- Know what triggers each cover – breakdown vs property damage vs liability vs professional negligence.
- Check territories and jurisdictions – especially for export and overseas supply chains.
- Review contract terms – fitness for purpose, indemnities, liquidated damages and liability caps can create gaps.
- Validate sums insured – underinsurance is one of the most common claim-reduction causes.
- Confirm work away / installation – many manufacturers do on-site work that needs declaring.
- Document maintenance and QA – some covers rely on “reasonable precautions” and maintenance standards.
Property Insurance Exclusions & Gaps (Buildings, Contents, Stock & WIP)
Property cover is the backbone of most manufacturing packages — but it’s also where values and definitions matter most. Manufacturers have unusual exposures: high-value plant and tooling, work in progress that builds over months, stock concentrations, and high fire loads from packaging, solvents, or fabrication processes. The most common “gap” is not an exclusion at all — it’s underinsurance.
The list below highlights typical pitfalls we see: missing cover for WIP, incorrect stock peak values, restrictions on theft, and confusion around what constitutes “plant” vs “contents”. These issues can be addressed with correct declarations and wording.
Common Property Exclusions / Restrictions
- Wear and tear / gradual deterioration – not a sudden “insured event”.
- Faulty workmanship / defective design – often excluded as a cause of damage (but resultant damage may differ by wording).
- Theft conditions – theft may require forcible and violent entry/exit, and security warranties may apply.
- Unoccupied premises restrictions – reduced cover if a site is unoccupied for a defined period.
- Escape of water conditions – may require maintenance of sprinkler/pipework and reasonable precautions.
- Flood risk endorsements – flood may be excluded or sub-limited in higher-risk areas.
Common Gaps for Manufacturers
- Underinsured stock / WIP peaks – seasonal or project build-ups not reflected in sums insured.
- Incorrect “machinery” values – CNC, test rigs, compressors, and tooling not valued at replacement cost.
- Tooling and patterns – customer-owned tooling/patterns not covered unless declared/endorsed.
- Stock at third-party locations – goods stored offsite not included without an extension.
- Goods in transit – property cover usually stops at the premises; transit needs separate cover.
- Inadequate reinstatement period – rebuilding and re-equipping can take longer than expected.
Practical fix: treat values like an engineering exercise. Identify maximum exposures (peak stock/WIP), confirm replacement cost (not book value), and ensure definitions match your assets (plant vs contents vs tooling). For multi-site operations, confirm each location has correct sums insured.
Machinery Breakdown (Engineering) Exclusions & Gaps
Machinery breakdown is designed for sudden and unforeseen mechanical or electrical failure. The most common misunderstanding is assuming it covers anything that “goes wrong” with a machine. In reality, insurers often exclude gradual deterioration and may require reasonable maintenance. The policy also needs to list or define the equipment correctly — otherwise a “critical” machine may fall outside the schedule.
Typical Engineering Exclusions
- Wear and tear, corrosion, erosion, and gradual deterioration.
- Consumables – belts, filters, fuses, lubricants (varies by wording).
- Maintenance-related failures where insurers allege inadequate upkeep.
- Known defects existing prior to inception or not disclosed.
- Consequential loss unless BI/Delay is specifically included (wording dependent).
Common Gaps
- Unscheduled critical machinery – the “one machine” that stops the whole line isn’t declared.
- Incorrect basis of settlement – values don’t reflect replacement lead times and real cost.
- Utilities dependencies – compressors, power distribution, cooling systems not considered.
- Hired-in plant – temporary equipment not covered unless included.
- Damage during maintenance – if not structured correctly, “work on the machinery” can create grey areas.
Practical fix: declare critical assets, align maintenance documentation, and ensure the breakdown section is matched with BI or extra cost cover where downtime is the real risk.
Business Interruption (BI) Exclusions & Policy Gaps
Business Interruption is powerful, but it’s also frequently misunderstood. BI usually responds to interruption caused by insured property damage. If your biggest risk is downtime due to machinery breakdown or utilities failure, you may need specific extensions. BI can also fail if your gross profit is underdeclared or if the indemnity period is too short for a realistic recovery.
Typical BI Exclusions / Limitations
- No property damage trigger – BI often requires insured damage to your premises/insured property first.
- Short indemnity period – recovery takes longer than the policy allows.
- Supplier/customer dependency – contingent BI may not be included without extension.
- Utilities interruption – power/water/telecoms often require a specific extension and may be sub-limited.
- Increased cost of working conditions – costs must be “economical” and properly evidenced.
Common Gaps
- Underdeclared gross profit – leads to average and reduced claim payment.
- Seasonality – if your peak trading period is not reflected, BI can underperform.
- Long-lead machinery – replacement timelines exceed indemnity period.
- WIP rebuild time – rework and re-qualification periods overlooked.
- Non-damage events – cyber outages, breakdown-only events, and port delays need separate solutions.
Practical fix: set a realistic indemnity period (often 12/24/36 months), declare accurate gross profit, and add extensions for your true dependencies (utilities, suppliers, customers, breakdown).
Liability, Product, and Professional Risk Gaps
Manufacturing claims often involve a combination of product performance, property damage, and financial loss. This is where policy “boundaries” matter. Public/Products Liability typically responds to injury and property damage. Professional Indemnity responds to professional negligence and financial loss. If your business designs, specifies, advises, or certifies — you may need PI to avoid a major gap.
Public & Products Liability Exclusions / Limits
- Contractual liability – liabilities assumed beyond common law may be excluded.
- Pure financial loss – often excluded unless linked to injury/property damage or endorsed.
- Recall/remedial costs – usually excluded unless a specific extension/product is in place.
- Territory/jurisdiction restrictions – overseas claims may be excluded if not correctly arranged.
- Work away / heat work – some policies need disclosures/endorsements for onsite activities.
Professional Indemnity (PI) Gaps
- Design/specification not declared – insurer may treat your services as outside scope.
- Fitness for purpose – often excluded/restricted unless specifically covered.
- Claims-made continuity – a lapse in PI can create a gap for historic work.
- Known circumstances – disputes/concerns not disclosed can be excluded.
- Contractual warranties – performance guarantees can sit outside PI unless aligned.
Practical fix: map your activities (manufacture + design + installation + advice) and ensure you have the right liability “stack”: EL + PL/Products + PI (where needed) + export endorsements.
“We had liability cover and assumed that would deal with a dispute. The issue was a specification and financial loss claim — and it needed a different solution. Once we understood the exclusions, we rebuilt the cover properly.”
Director, UK Engineering ManufacturerExport, Transit & Contract Works Gaps
Manufacturers often discover gaps when the goods leave the premises or when work happens at a customer site. Property cover usually ends at your premises. Transit needs goods in transit / cargo cover. Overseas liability needs correct territory/jurisdiction. Installation and commissioning can require contract works and work-away liability.
Transit / Cargo Common Gaps
- No cargo cover – relying on carrier/forwarder limited liability.
- Insufficient shipment limits – maximum single shipment value not aligned to reality.
- Packaging conditions – insurers may require suitable crating/securing for heavy equipment.
- Storage in transit not included – depot/warehouse risk sits outside cover without extension.
- Incorrect Incoterms assumptions – risk transfer misunderstood creating uninsured gaps.
Contract Works / Installation Common Gaps
- Work away not declared – onsite activities not captured within liability policy scope.
- Testing/commissioning phase – “when does responsibility end?” is unclear.
- Damage to the works – contract works may need separate insurance for materials and works underway.
- Tools/equipment offsite – portable kit not covered away from the premises.
- Overseas site work – may require additional territory/jurisdiction and travel considerations.
PROTECT YOUR BUSINESS
- Identify and close the most common manufacturing insurance gaps
- Align cover with design, specification, installation and export activities
- Avoid underinsurance on plant, tooling, stock and WIP
- Ensure BI triggers and indemnity periods match real recovery timelines
- Confirm overseas territory/jurisdiction and contract requirements
- Structure a joined-up programme that responds in real claim scenarios
FREQUENTLY ASKED QUESTIONS
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Why do manufacturing claims get rejected or reduced?
The most common causes are underinsurance (values too low), missing extensions (e.g. transit, work away, utilities), incorrect territories/jurisdictions,
and misunderstanding what triggers a policy section (e.g. BI typically needs insured property damage). Documentation and maintenance expectations can also matter.
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Does Business Interruption cover any downtime?
Often no. BI usually responds to interruption caused by insured property damage (like fire or flood). Downtime caused by breakdown, utilities interruption,
or cyber outages may need separate cover or extensions. The wording and triggers are key.
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Is wear and tear covered under Machinery Breakdown?
Typically not. Machinery breakdown is intended for sudden and unforeseen failure. Wear and tear, gradual deterioration, corrosion and similar “maintenance” issues
are usually excluded. Insurers may also expect reasonable maintenance records.
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Do I need Professional Indemnity if I manufacture products?
If you provide design, specification, calculations, consultancy, testing or advice, you may need PI. Public/products liability typically focuses on injury/property damage,
while PI responds to professional negligence and financial loss claims. Many manufacturers have both exposures.
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Are goods covered once they leave my premises?
Often not under standard property cover. You usually need goods in transit / marine cargo insurance to cover loss or damage during delivery and export,
and an extension if goods are stored at third-party locations or in transit depots.
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What are the most common contract-related gaps?
Fitness for purpose obligations, broad indemnities, overseas jurisdiction clauses, and liquidated damages provisions can create insurance gaps.
It’s important to review insurance clauses early and structure cover around realistic contractual exposures.
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How can I reduce the risk of exclusions causing a claim issue?
Start with an accurate description of operations, correct values and limits, and confirm territories/jurisdictions and work away activities.
Keep maintenance, QA and training records, and review contract insurance clauses. A structured review before inception is usually the best way to prevent gaps.