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INSURANCE DESIGNED FOR PRECISION MANUFACTURERS
Precision Engineering Risk Is Different
Precision engineering manufacturing is built around accuracy, repeatability, and process control — but the commercial consequences of failure can be severe. A minor dimensional deviation, surface finish issue, heat treatment error, or material traceability gap can lead to part rejection, downstream equipment damage, warranty disputes, or high-value liability claims once components are installed into larger systems.
On top of that, precision engineering firms concentrate value in assets that keep the shop running: CNC machining centres, turning centres, multi-axis machines, grinders, EDM/wire EDM, inspection equipment (CMM), specialist tooling, jigs, fixtures, and high-value materials. When any critical part of that chain fails — fire, flood, theft, electrical events, or machinery breakdown — production and cashflow can stop fast.
Insure24 arranges precision engineering manufacturing insurance that’s built around these realities: the right liability structure, realistic property and stock values, business interruption that matches recovery times, and engineering breakdown options for key machinery.
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What Is Precision Engineering Manufacturing?
Precision engineering typically refers to manufacturing processes where tight tolerances, repeatability and quality control are critical. Many businesses in this sector work to microns, operate traceability systems, and supply into industries with strict requirements.
Precision engineering manufacturing can include (but is not limited to):
Common Precision Processes
- CNC turning, milling and multi-axis machining
- Grinding, lapping and polishing
- EDM and wire EDM
- Toolmaking and precision fixtures
- Prototype and low-volume specialist manufacturing
- Inspection and metrology (CMM, gauges, calibration systems)
Industries You Might Supply
- Aerospace and aviation supply chains
- Automotive (incl. EV supply chains)
- Medical devices and life sciences
- Defence and security industries
- Energy and renewables
- Food production machinery and packaging equipment
The insurance implications change depending on end-use. A component used in a safety-critical system is generally rated differently to a part used in low-risk consumer equipment. That’s why we focus on accurately describing your products, customers, and use-cases to insurers.
What Insurance Does a Precision Engineering Manufacturer Need?
There isn’t a one-size-fits-all policy — but most precision engineering manufacturers build their cover around a core set of protections. The right structure depends on your activities (manufacture only vs design/specification), your premises, your machinery values, and your contracts.
Essential Covers
- Employers’ Liability (generally required if you employ staff)
- Public Liability (third-party injury and property damage)
- Products Liability (claims arising from goods you manufacture/supply)
- Property / Contents (premises, tools, fixtures, office equipment)
- Stock & Materials (raw materials, WIP, finished goods)
- Business Interruption (loss of gross profit/income after insured events)
Specialist Covers Often Needed
- Machinery & Equipment Breakdown (mechanical/electrical failure)
- Professional Indemnity (design/specification advice and drawings)
- Goods in Transit (high-value components in delivery/courier movement)
- Contract Works / Projects (bespoke builds, prototypes, client-owned items)
- Cyber & Data (CAD/CAM, ERP/MRP, ransomware and business email compromise)
- Legal Expenses (contract disputes, employment disputes, debt recovery)
Public & Products Liability for Precision Manufacturers
Liability cover is usually the foundation for precision engineering businesses because downstream consequences can be significant. Products liability is designed to cover claims for third-party injury or property damage caused by your product. Public liability covers injury/damage to third parties arising from your business activities (including visitors, client inspections, and off-site work).
What matters in precision engineering is not just “having products cover” — it’s ensuring the policy matches: where you sell, what you make, what it is used for, and what your contracts require.
Common Precision Engineering Liability Scenarios
- A machined part fails in service and damages other equipment
- Incorrect tolerances cause overheating, seizure, or mechanical breakdown
- Material substitution or traceability gaps contribute to failure
- Surface finish/coating issues cause premature wear
- A component causes a leak leading to property damage
- On-site visit or installation support results in third-party injury/damage
Where you supply into high-risk or safety-critical environments, we’ll help ensure the policy’s territorial and jurisdiction wording is aligned, especially if you export or your customers distribute internationally.
Important Reality: “Rework” Is Usually Not Liability
Precision engineering businesses often face the cost of remanufacture, scrap, and rework when a batch is rejected. That is usually a commercial and quality issue rather than a liability claim — unless there is injury or property damage caused by the defect.
That’s why we focus on building an insurance programme that responds to catastrophic exposures (injury/damage, major disputes, insured downtime), while you manage “batch rejection” risk via QA, traceability, inspection regimes, and carefully drafted terms of supply.
- Clear purchase order terms and limitation of liability where possible
- Documented inspection and sign-off processes
- Material traceability and controlled suppliers
- Change control for drawings, tolerances and revisions
Property, Stock, Tooling & Customer Goods
Precision shops often hold high value in a small footprint: exotic alloy stock, customer-supplied materials, tooling, fixtures and gauges. The key to a strong property programme is making sure sums insured reflect reality — especially at peak material holdings.
Many businesses also hold customer goods (materials, tooling, moulds, jigs, special fixtures) in their custody. Whether these can be insured depends on contract arrangements and policy terms — but if you could be held responsible for them, it should be discussed upfront.
Common Items to Declare
- Raw materials (including high-value alloys/metals)
- Work in progress (WIP) and components awaiting inspection
- Finished stock awaiting dispatch
- Tooling, fixtures, jigs, gauges and inspection equipment
- Office equipment, IT, servers and specialist electronics
- Tenant improvements / fit-out (if not insured by landlord)
Underinsurance can reduce claims settlement. We help set realistic figures and reflect inflation and replacement lead times.
Security & Theft Risk
Precision manufacturers can be attractive targets: metals, copper, specialist tooling, and portable measurement equipment. Insurers focus on security because theft claims can be frequent and high value.
- Intruder alarms and maintenance certificates
- CCTV coverage and lighting
- Physical security of high-value stores/tool cribs
- Key holding and access control procedures
- Out-of-hours procedures and perimeter protection
Good security can materially improve pricing and reduce exclusions/conditions.
Machinery Breakdown & Business Interruption (Downtime Protection)
Precision manufacturing relies on high-value machines. A single breakdown can stop production, miss delivery dates, and trigger contractual friction. Many businesses discover too late that standard property policies are not designed for internal mechanical/electrical failure.
Machinery & equipment breakdown can respond to sudden and unforeseen breakdown (mechanical or electrical) and may include extensions for additional costs and downtime losses when structured correctly.
Why Breakdown Cover Matters
- CNC spindle, axis and drive failures can be expensive
- Electrical arcing/short circuit can disable key equipment
- Hydraulic/pneumatic failures can cause internal damage
- Compressor/chiller failure can halt production utilities
- Control system failures can stop automation
We help you schedule and value key machinery properly so the cover aligns with repair/replacement realities.
Business Interruption: The Cashflow Protector
Business interruption (BI) covers loss of income/gross profit following insured events, and can include increased costs of working: outsourcing, overtime, temporary equipment, express freight, and other measures that reduce the loss.
- Loss of gross profit and continuing expenses
- Increased cost of working to keep trading
- Supplier/customer dependency extensions (where appropriate)
- Utilities interruption extensions (where available)
Many manufacturers choose an indemnity period that’s too short. We’ll help you select a realistic recovery timeframe.
Professional Indemnity for Precision Engineering (If You Design or Advise)
If your business provides design input, specifications, drawings, prototypes, or engineering advice, you may need professional indemnity (PI). PI is designed to respond to allegations of professional negligence causing financial loss — even when there’s no injury or property damage.
Many precision manufacturers unintentionally “step into PI territory” by recommending tolerances/materials, making drawing changes, or producing CAD/CAM programmes that clients rely upon. If that sounds like you, it’s worth aligning PI with your products liability and contract structure.
Typical PI Exposures
- Design-for-manufacture advice and optimisation
- Tolerance/material recommendations and approvals
- Prototype development and engineering input
- Inspection or certification work relied on by clients
- Integration advice for assemblies/systems (where applicable)
What Insurers Want to See
- Document control and revision tracking
- Clear scope of work and client sign-offs
- Quality management and traceability systems
- Change control for drawings and programmes
- Claims history and corrective actions
Strong governance can improve PI pricing and reduce exclusions.
Contracts, Warranty Risk & Disputes (The Commercial Reality)
Precision engineering often runs on strict contracts: delivery dates, acceptance criteria, testing regimes, traceability requirements, and warranty obligations. Some contract clauses can shift liability beyond what standard insurance is designed to cover, such as: uncapped liability, fitness-for-purpose obligations, broad indemnities, and liquidated damages for late delivery.
Insurance is only one part of managing contractual risk. The best approach is: (1) understand the clauses, (2) negotiate where you can, (3) ensure insurance aligns to what is insurable, and (4) use legal expenses cover to help manage disputes where appropriate.
Common Contract “Pain Points”
- Uncapped liability or liability caps above your insurance limits
- Fitness-for-purpose obligations (beyond reasonable skill and care)
- Consequential loss wording (loss of profit, loss of production, loss of use)
- Liquidated damages for late delivery
- Extended warranties and broad “make good” obligations
Useful Supporting Covers
- Legal Expenses: contract disputes, employment disputes, debt recovery (subject to terms)
- Business Interruption: protect cashflow if an insured event disrupts delivery capacity
- PI: where disputes involve design/specification allegations
- Product Liability: for resulting damage/injury claims
We’ll help you map insurance to contract realities — and highlight what is generally not covered (e.g., penalties/LDs in many cases).
Risk Management That Improves Insurance Terms
Insurers reward resilience and evidence. Precision engineering businesses often have strong controls, but the best insurance outcomes usually come when those controls are documented and easy to present at renewal. Here are the areas that often matter most:
Quality, Traceability & Inspection
- Calibration schedules and evidence (CMM, gauges, metrology tools)
- Material traceability and batch control
- Non-conformance reporting and corrective action
- Drawing revision control and sign-off processes
- Supplier approval and outsourced process control (heat treat/coating)
Premises & Machinery Controls
- Electrical inspections and maintenance records
- Housekeeping (swarf/coolant management, walkways clear)
- Fire risk controls and hot works permits
- Security: alarms, CCTV, tool crib procedures
- Planned maintenance on critical machines and utilities
Better controls can reduce premium, improve capacity, and reduce policy conditions.
Why Choose Insure24 for Precision Engineering Manufacturing Insurance?
- Sector-aware advice: We understand precision manufacturing, downtime risk and supply chain expectations.
- Better underwriting presentation: We translate your processes into clear insurer language.
- Programme design: Align PL/Products, property, BI and breakdown so the cover works together.
- Contract-ready support: Help meeting client limits and evidence of insurance requirements.
- Claims support: Practical guidance when speed and documentation matter.
Whether you are a CNC job shop, toolmaker, prototype specialist or a multi-site precision manufacturer, we’ll help you arrange cover that matches your reality.
FREQUENTLY ASKED QUESTIONS
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What insurance does a precision engineering manufacturer need?
Most precision manufacturers need employers’ liability (if employing staff), public liability, products liability, property/contents and stock cover, and business interruption. Many also benefit from machinery breakdown cover for critical equipment, plus optional PI where design/specification advice is provided.
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Does products liability cover rejected batches or rework?
Usually not. Products liability is primarily designed for third-party injury or property damage caused by your product. Pure batch rejection, scrap, or rework costs (where no injury or property damage occurred) are typically treated as commercial/quality issues rather than insured liability claims.
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Do precision engineering firms need machinery breakdown insurance?
Often yes, especially where the business relies on high-value CNC machinery, grinders, EDM equipment, compressors, or site utilities. Breakdown cover is designed for sudden mechanical or electrical failure that may not be covered under standard property policies.
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When is professional indemnity required for precision manufacturers?
If you provide design input, specifications, drawings, prototypes, calculations, or engineering advice clients rely on, PI may be appropriate. It can cover claims alleging professional negligence causing financial loss, subject to the policy wording and exclusions.
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How do I choose the right business interruption indemnity period?
Choose an indemnity period based on worst-case recovery time, including repairs to premises, replacement lead times for specialist machinery/parts, commissioning, and the time needed to regain normal turnover. Many manufacturers need more than 12 months depending on resilience and supply chain reliance.
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Can Insure24 help with contract-required limits and insurance certificates?
Yes. We can help align limits, territorial/jurisdiction settings and policy structure to common customer requirements, and provide evidence of insurance. If contract clauses create gaps (e.g., fitness for purpose, uncapped liability, liquidated damages), we’ll highlight the issue and discuss options to manage exposure.