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CNC & MACHINE TOOL MAKER INSURANCE — FACTORY, PROTOTYPES, PRODUCT LIABILITY & INSTALLATION RISK
Why Machine Tool & CNC Equipment Manufacturers Need Specialist Insurance
Making machine tools and CNC equipment sits at the intersection of manufacturing, engineering design and high-consequence product liability. Even a “small” issue can become expensive because your products are used in production environments — a failure can damage a customer’s workpiece, disrupt an automated cell, or create safety concerns that trigger shutdowns and disputes.
Insurers don’t just look at your turnover. They look at what you build (manual machine tool vs multi-axis CNC vs automation), how you test, where you install and service equipment, the industries you supply, and whether your contracts include warranties, liquidated damages, fitness-for-purpose wording or uncapped indemnities. The right programme is built to protect both physical loss (fire, flood, breakdown, theft, transit damage) and commercial fallout (product liability, design allegations, installation claims, downtime and contractual disputes).
This page explains the core covers machine tool and CNC equipment manufacturers typically need, the specialist extensions that often become critical in claims, and the information insurers want to see to quote quickly and competitively.
The Core Insurances Most Machine Tool & CNC Equipment Manufacturers Need
Most programmes start with property, liability and downtime protection — then we tailor for prototypes, testing, installation, export, and design responsibility. The aim is to remove gaps between sections so one incident doesn’t leave you uninsured at the point it matters.
1) Property (Buildings, Contents, Stock, Demonstrator Machines)
- Buildings (owned premises) and/or tenant improvements
- Contents including tools, fixtures, IT, racking and workshop equipment
- Stock of bought-in components, motors, drives, control panels and spares
- Demonstrator / finished machines held at your site (correctly described and valued)
- Perils typically include fire, flood, storm, escape of water and theft (wording-dependent)
Machine tool manufacturing sites often carry high concentrations of value: precision assemblies, control cabinets, spindles, ball screws, servo drives, and finished units awaiting dispatch. Underwriters focus on fire prevention, housekeeping, security, storage method and how you manage ignition sources, hot works and contractors.
2) Business Interruption (BI) & Increased Cost of Working
- Loss of gross profit following insured property damage
- Increased Cost of Working to keep orders moving (outsourcing, overtime, expedited freight)
- Indemnity period chosen to match realistic recovery time
For OEM-type manufacturers, the biggest financial hit is often the delay: missed delivery windows, rework, and customer penalties. BI needs to be set with realistic lead times for specialist plant, electrical repairs, and clean-up after a major loss.
3) Employers’ Liability (EL)
- Protects against employee injury/illness claims arising from their work (subject to policy)
- Key for machining, fabrication, assembly, testing, lifting operations and electrical work
- Often a legal requirement where you employ staff (with limited exceptions)
Machine tool manufacturing involves moving loads, working with sharp edges, rotating machinery, guarding, electrical systems and repetitive assembly tasks. Insurers like to see training records, risk assessments, lifting regimes, and strong supervision.
4) Public Liability (PL) & Products Liability
- Public Liability – third-party injury/property damage from your premises/operations
- Products Liability – injury/property damage caused by machines and equipment supplied
- Extensions for installation, commissioning, service visits and work away (where needed)
Liability is often the headline risk for machine tool makers because claims can involve high-value customer property and safety allegations. The key is accurately declaring what you do: manufacture only, manufacture + install, service and maintenance, retrofits, controls upgrades, and export.
5) Engineering / Machinery Breakdown (Your Plant)
- Covers sudden and unforeseen breakdown of insured equipment (wording-dependent)
- Relevant for CNCs, grinders, compressors, extraction, cranes/hoists and test rigs
- Often paired with machinery breakdown BI where downtime is the main threat
Many production delays start as internal breakdown events rather than fire or flood. If a key machine, compressor or test rig fails, engineering cover can protect repair costs and support a smoother recovery.
6) Goods in Transit / Marine Cargo (Machines, Parts & Spares)
- Protects shipped goods in your vehicles or with third-party carriers (subject to terms)
- Useful for finished machines, control cabinets, spindles, heads, assemblies and spares
- Options for UK-only, EU and worldwide shipments (depending on sales)
CNC equipment is vulnerable in transit: tipping, fork damage, vibration and moisture can create losses that are expensive to diagnose. Correct packing, declared values, and clarity on Incoterms and responsibility are essential.
Specialist Covers for Machine Tool & CNC Equipment Manufacturers
The difference between “a standard manufacturing package” and a programme that actually performs is how it treats the specialist risks: design allegations, commissioning losses, contract works, software/controls issues, prototype testing, and overseas installation. Below are common add-ons we arrange for machine tool manufacturers.
Professional Indemnity (Design, Spec & Integration Risk)
- Relevant if you provide drawings, system layouts, safety specifications or integration advice
- Common triggers: wrong specification, control logic errors, integration failures, performance allegations
- Supports defence costs and financial loss claims (subject to policy)
Many OEMs assume “products liability covers everything”. It doesn’t. If the allegation is primarily about financial loss due to design/specification errors (rather than injury or physical damage), PI is often the policy designed for that exposure.
Contract Works / Erection All Risks (Installation & Commissioning)
- Protects works in progress on site where you retain responsibility
- Useful for machine installation, automation cells, guarding, conveyors and integrated lines
- Often paired with higher PL limits for on-site work
A common grey area is “when the machine becomes the customer’s responsibility”. If the machine is damaged during offload, positioning, assembly or commissioning, you need clarity on contractual responsibility and insurance structure.
Products Liability Enhancements (Customer Property, Recall, Worldwide)
- Adequate limits for high-value customer sites and industries supplied
- Consideration of customer property “in your care” during service/commissioning (wording-dependent)
- Options for worldwide territories and exports (where needed)
- Product recall / rectification options where commercially available and relevant
Underwriters will ask about end-use: aerospace, automotive, defence, medical, nuclear, food, or “general engineering”. Clear information on sectors, safety features, guarding and testing improves insurer confidence.
Cyber & Operational Technology (OT)
- Backstop for ransomware, business email compromise, and data restoration (coverage varies)
- Options for cyber business interruption (where offered)
- Relevant where machines connect to networks, remote support tools, or cloud monitoring
Machine tool manufacturers increasingly support customers with remote diagnostics and software updates. Cyber risk becomes both an internal continuity risk and a reputational risk if an incident affects support capability.
Testing, Prototype & Demonstrator Exposure
- Correct declaration of prototype machines and demonstrators held at your premises
- Clarity on test processes, guarding, interlocks and supervised operation
- Engineering cover alignment where test rigs are critical
Prototypes and demonstrators are often high-value and non-standard. Insurers need to understand how they are used, who operates them, and the safety controls in place. Accurate valuations and descriptions prevent disputes later.
Management Liability (D&O) & Governance
- Protection for directors/officers against management liability allegations (policy dependent)
- Relevant where you supply regulated industries, export, or have contractual governance exposure
- Often considered alongside cyber and key person planning
Not every manufacturer needs D&O, but where the business is contract-heavy, export-focused, or operating with external investment, it’s a common risk management discussion.
The claim wasn’t “a fire” — it was commissioning damage and a customer dispute. The difference was having the right split of products liability, installation cover and contract clarity. Insure24 helped structure the programme so it responded cleanly.
Managing Director, CNC Equipment ManufacturerHow to Build an Insurer-Friendly Machine Tool / CNC OEM Submission
Insurers quote faster and more competitively when they understand your risk story. For machine tool and CNC equipment manufacturers, the key is being clear about what you build, who you supply, and the boundaries of your responsibility (manufacture only vs install vs service). Below is what typically speeds up quoting and improves terms.
Information That Speeds Up Quoting
- Clear business description: machine tools, CNC machines, automation, retrofits, controls panels, guarding
- Turnover split: UK vs export, manufacture vs installation vs service, and sector split (automotive, aerospace, general engineering, etc.)
- Product detail: typical machine values, maximum single unit value, demonstrator exposure and storage
- Site details: construction, fire protection, security, housekeeping, neighbours and hot works controls
- Testing & commissioning: how machines are tested, guarding/interlocks, competence and supervision
- Transit & install: packing method, carriers used, Incoterms, lifting/offload method and subcontractor controls
- Claims history and what changed since any incidents
A short product overview plus a simple “responsibility map” (manufacture / ship / install / commission / service) can materially reduce insurer queries.
Controls That Often Improve Terms
- Quality controls: inspection records, sign-off checklists, traceability for critical components
- Documented installation & commissioning procedures and competence records
- Contract governance: review of liability caps, warranties, fitness for purpose and consequential loss
- Fire risk management: hot works permits, segregation, waste controls and fire protection measures
- Cyber basics where you provide remote support: MFA, backups, patching and supplier controls
- HSE evidence: risk assessments, lifting plans, LOLER/PUWER compliance where relevant
Underwriters price uncertainty. Demonstrating disciplined controls reduces uncertainty — and usually reduces premium pressure.
FREQUENTLY ASKED QUESTIONS
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What’s the minimum insurance most CNC equipment manufacturers start with?
Most start with employers’ liability (if you employ staff), public/products liability, and property cover for the premises, stock and demonstrator machines.
Business interruption is then added to protect profit and cashflow after a serious insured loss that stops production.
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Do we need professional indemnity if we “only manufacture” machines?
If you provide drawings, system layouts, performance advice, integration specifications, safety recommendations or control logic support,
professional indemnity can be relevant because it’s designed for financial loss allegations arising from professional errors/omissions.
If you truly manufacture to a fixed customer specification with no advice, PI may be less relevant — but many businesses provide some level of design input.
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How do insurers view installation and commissioning risk?
Installation and commissioning often increases exposure because you are working on customer sites, using lifting/offload operations, and taking responsibility
for work in progress. Insurers usually want clear procedures, competence evidence, and clarity on where responsibility starts/ends under contract.
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What cover protects machines while they’re being shipped to customers?
Goods in Transit (UK) and/or Marine Cargo (export) can protect machines, parts and spares during carriage, subject to terms.
The key is accurate values, correct packing, and clarity on Incoterms and who is responsible at each stage.
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Can insurance cover customer downtime if a machine fails?
Most liability policies focus on bodily injury and property damage (subject to wording). Pure financial loss (like customer production downtime without damage)
is often a contractual issue and may not be covered. This is why contract review (consequential loss clauses, warranties, liability caps) is critical.
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How can machine tool manufacturers reduce premiums?
Provide clear information, accurate valuations and strong evidence of controls: fire risk management, security, quality procedures, commissioning checklists,
training records, and a documented contract review process. Sensible deductibles and a clean claims history also help.
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Can the covers be combined into one policy?
Often, yes — many businesses place a combined manufacturing package for property, business interruption and liabilities.
Professional indemnity, contract works and cyber may be included or placed separately depending on insurer appetite and the complexity of your operations.
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What does Insure24 need to quote CNC equipment manufacturing insurance?
A clear process and product description, turnover and export split, maximum single machine value, site details, testing/commissioning procedures,
installation responsibilities, contract details (warranties, liability caps), and claims history. The clearer the story, the faster the quote.