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THE CHECKLIST THAT PREVENTS EXPENSIVE GAPS
Why You Need a Precision Engineering Insurance Checklist
Precision engineering businesses carry a unique mix of risk: tight tolerances, high-value machinery, valuable materials and work-in-progress, contractual delivery pressure, and the potential for downstream damage if a component fails in service. Many policies look correct on a schedule, but still contain gaps in wording, limits, territory, or insured values that only show up after a loss.
This checklist helps you validate your cover across the main insurance lines used by precision engineering manufacturers and machine shops — and highlights the supporting documents insurers (and major customers) often request. Use it for renewals, tenders, contract reviews, or whenever you expand into new sectors or export territories.
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How to Use This Checklist
Work through each section and answer the questions honestly. Where you are unsure, that’s usually a sign you should confirm with your broker or insurer. Keep notes of: (1) your current limits/values, (2) any contract requirements from customers, and (3) what changed in the last 12 months.
Many coverage issues are caused by change: new products, new end-use industries, exports, higher machine values, higher stock peaks, or adding design/specification services. If you’ve changed any of these, treat this checklist as essential.
Section 1: Your Precision Engineering Risk Profile (The 10-Minute Snapshot)
Before checking cover, define your risk profile. Underwriters use this to decide appetite, pricing, and policy terms. If this section is vague, everything else becomes “worst case” — and worst case is expensive.
Business Activity
- What do you do? (CNC machining, turning, milling, grinding, EDM, toolmaking, assembly, fabrication)
- Do you manufacture to customer drawings only? Or provide design/DFM/spec input?
- Do you handle customer-owned tooling/materials? (jigs, fixtures, moulds, gauges, raw stock)
- Do you install/commission off-site? Or is all work at your premises?
- Any outsourced processes? (heat treatment, plating, coating, specialist testing)
This is the foundation for liability and PI exposure. If you provide any advice/design work, you may need PI alongside products liability.
End Use & Supply Chain
- Who do you sell to? (OEMs, tier suppliers, MRO, direct customers, public sector)
- Where do parts end up? (automotive, aerospace, medical, defence, energy, food machinery, general)
- Safety-critical components? If yes, document controls/traceability and inspection regime
- Exports? (UK only / EU / worldwide; any USA/Canada exposure)
- Contract requirements? (insurance limits, wording, additional insured, indemnities)
Product criticality and territory are two of the biggest drivers of liability terms and premium.
Section 2: Liability Checklist (Public + Products + Employers’ Liability)
Liability is about third-party claims: injury and property damage caused by your operations or products. For precision engineering, the “severity” risk is downstream damage: a small component can create a large loss if it fails in service.
Public & Products Liability
- Limit of indemnity matches customer contracts (common: £2m / £5m / £10m+)
- Territory/jurisdiction matches where goods are sold/used (declare exports; any USA/Canada)
- Products cover included (not just “public liability” for premises/operations)
- Work away / off-site included if you visit customer sites (install/commission/service)
- Heat work / welding / cutting disclosed if relevant (hot works controls documented)
- Completed products wording appropriate for components/assemblies you supply
- Defence costs included (and whether costs are “in addition to” the limit)
- Contractual liability reviewed — understand what your policy can and can’t cover
Reality check: products liability is primarily for injury/property damage claims. Batch rejection and rework are usually commercial quality costs.
Employers’ Liability (EL)
- EL in place if you employ staff (including temps, apprentices where applicable)
- Limit meets UK norms and contract expectations
- Accurate employee activities declared (machining/fabrication/assembly/warehouse/office)
- Health & safety controls evidenced (PPE, training, COSHH, risk assessments)
- Plant/forklift usage disclosed (FLT training, inspections, segregation)
- Noise/vibration exposure managed (assessments, hearing protection, monitoring)
EL claims can be frequent in workshop environments. Good evidence of controls and training helps pricing and underwriting.
Checklist tip: if your customers send “insurance requirements” documents, don’t file them away. Compare them line-by-line with your policy schedule and wording. Many tender failures are due to small mismatches: wrong limit, wrong territory, missing products cover, or certificates not updated.
Section 3: Professional Indemnity Checklist (If You Design, Advise or Modify Specs)
Many precision engineering businesses “accidentally” create PI exposure by advising on tolerances/materials, suggesting design changes, or supporting prototyping and engineering decisions. PI is generally about financial loss due to alleged professional negligence — which can arise even if there is no injury or property damage.
PI Relevance Questions
- Do you provide design-for-manufacture advice?
- Do you recommend tolerances, finishes, coatings, or material grades?
- Do you change drawings or issue revised CAD/CAM programmes with client reliance?
- Do you supply prototypes with engineering input and sign-off?
- Do you carry out inspection/certification work relied upon by customers?
If you answered “yes” to any of these, discuss PI. It may also be a contractual requirement.
PI Policy Checks
- Limit aligned to contract requirements and realistic worst-case disputes
- Retroactive date (or “full” retro) suitable for long-tail claims
- Territory/jurisdiction aligns with where advice is relied upon
- Contractual liability wording reviewed (avoid agreeing to uninsurable obligations)
- Document control and sign-offs in place (helps defend claims)
PI is as much about defensibility as it is about cover. Strong documentation helps outcomes.
Section 4: Property, Tools, Stock & Materials Checklist
Precision engineering businesses often store high value in a small footprint: machines, tooling, fixtures, gauges, stock, and WIP. The biggest mistakes here are underinsurance (values too low) and missing categories (WIP peaks, customer goods, high-value tool cribs).
Values & Sums Insured
- Buildings insured for rebuild cost (if you insure buildings)
- Machinery valued realistically (replacement, installation, commissioning where relevant)
- Tools & portable equipment included (gauges, metrology gear, tool cribs)
- Stock/materials includes average and peak levels (include WIP)
- IT and electronics included (servers, CAD/CAM workstations, controllers)
- Customer-owned goods declared if you may be responsible
If you’ve added machines or stock values have risen, update your sums insured immediately — not at renewal.
Premises Controls (Underwriting Requirements)
- Fire controls documented (housekeeping, waste, extraction cleaning, hot works permits)
- Electrical inspection evidence available
- Security meets insurer requirements (alarm, CCTV, locks, keyholder procedures)
- Flood risk understood (and resilience actions where needed)
- Storage practices appropriate for materials and combustibles
Insurers will often apply conditions if alarms aren’t set, inspections are overdue, or housekeeping is poor.
Section 5: Machinery Breakdown & Downtime Checklist
Many manufacturers discover that “property insurance” doesn’t cover internal mechanical/electrical failure. If your main risk is downtime, breakdown cover and BI settings are critical.
Breakdown Cover Checks
- Machinery breakdown included for key equipment (CNC, EDM, grinders, compressors, chillers)
- Values reflect real repair/replacement cost and lead times
- Maintenance evidence available (service logs, planned maintenance schedules)
- Critical spares strategy considered (drives, motors, sensors, bearings)
- Utilities dependency recognised (compressed air, cooling, extraction, power)
If one machine is a single point of failure, treat its breakdown risk as a board-level issue — not a policy add-on.
Business Interruption for Downtime
- BI in place (not just property cover)
- Indemnity period realistic (often 18–24 months for specialist replacements)
- Gross profit / turnover calculated correctly (avoid underinsurance)
- Increased cost of working suitable (outsourcing, overtime, temporary solutions)
- Breakdown-triggered BI considered (if breakdown is a likely cause of stoppage)
If BI can’t trigger on your most likely downtime event, it may not protect you when you need it most.
Section 6: Transit, Off-Site, and Customer Goods Checklist
Precision parts often move frequently: to customers, to outsourced processors, or between sites. High-value goods can be at greatest risk in transit or temporarily off-site. If you rely on couriers, confirm where responsibility lies and what your policy actually covers.
Goods in Transit
- Transit cover in place if you ship high value items
- Max value per consignment set correctly
- Territory correct (UK/EU/worldwide)
- Method declared (own vehicles vs courier vs freight)
- Packaging and handling controls documented
Courier terms can limit their liability severely. If you routinely ship high-value parts, consider whether you need your own transit policy.
Customer-Owned Goods & Tooling
- Do you hold customer materials, WIP, or finished goods?
- Do you hold customer tooling (fixtures, jigs, moulds, gauges)?
- Are you contractually responsible if they are damaged?
- Is this declared to insurers and covered where possible?
- Do you have storage/security controls appropriate for customer goods?
If you could be liable, declare it. The worst time to discuss customer tooling is after a flood or theft.
Section 7: Cyber & Systems Checklist (CAD/CAM, ERP/MRP, Email Payment Fraud)
Many precision engineering firms are digitally dependent: CAD/CAM programmes, controllers, ERP/MRP systems, and customer portals. A ransomware incident or business email compromise can stop production, corrupt programmes, and create urgent financial losses.
Cyber Coverage (If Needed)
- Cyber cover considered if you rely on systems for production and customer delivery
- Business interruption from cyber events considered (where available)
- Ransomware response and recovery costs addressed
- Data restoration and IT forensic support included
- Funds transfer fraud / social engineering considered (payment controls matter)
Cyber underwriting depends on controls. If you have strong backups and MFA, you’re in a better position.
Controls Checklist (Underwriter-Friendly)
- MFA on email and remote access
- Backups tested regularly (ideally offline/immutable)
- Patching and endpoint protection in place
- Network segmentation between office and production systems
- Payment verification process for bank detail changes
These controls reduce risk and can materially improve cyber pricing and terms.
Section 8: Documents & Evidence Checklist (What Insurers and Customers Ask For)
Precision engineering underwriting improves when you can provide evidence quickly. Customers also request documentation as part of supplier approval and tender processes. Keeping these documents organised can reduce friction and speed up quotes.
Insurance & Contract Documents
- Current policy schedule(s) and certificates
- Customer contract insurance requirements (limits, territories, endorsements)
- Claims summary (5 years) and corrective action notes
- Business continuity plan (especially for key machine downtime)
- Asset register and machine list (values, age, maintenance approach)
Operational Evidence
- Quality controls (inspection sign-offs, NCR process, traceability)
- Calibration certificates / schedules (CMM, gauges, metrology tools)
- Health & safety documents (risk assessments, training, COSHH)
- Electrical inspections and fire risk assessment documentation
- Security evidence (alarm servicing, CCTV, access controls)
When insurers can see “how you control risk,” they are more likely to offer better terms and fewer conditions.
Quick Summary: The “Most Missed” Coverage Items
If you only take five actions from this checklist, make them these:
1) Confirm your policy includes products liability (not just public liability) and the territory/jurisdiction matches reality.
2) Confirm whether you need professional indemnity if you provide design/spec advice (even informally).
3) Check machinery breakdown if most downtime comes from internal failure (not fire/flood).
4) Validate business interruption sums insured and indemnity period (don’t underestimate recovery time).
5) Update property/stock/tooling values to avoid underinsurance — especially WIP and peak materials.
If you’d like, Insure24 can review your existing programme against this checklist and highlight gaps before renewal or tender deadlines.
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FREQUENTLY ASKED QUESTIONS
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What insurance does a precision engineering business need in the UK?
Most precision engineering businesses 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 key equipment, goods in transit for high-value parts, and professional indemnity where design/specification advice is provided.
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Does products liability cover rework or rejected batches?
Usually not. Products liability is primarily designed for third-party injury or property damage caused by your product. Pure rework, remanufacture, or batch rejection without injury/property damage is commonly treated as a commercial quality cost rather than an insured liability claim.
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When do precision engineering firms need professional indemnity?
If you provide design input, modify drawings/specifications, recommend tolerances/materials, support prototyping decisions, or provide engineering advice that customers rely on, professional indemnity may be appropriate to cover allegations of professional negligence causing financial loss (subject to wording and exclusions).
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Do I need machinery breakdown insurance if I already have property cover?
Often yes. Standard property insurance is designed around external perils (fire, flood, theft). Machinery breakdown is designed for sudden internal mechanical or electrical failure. If your most likely downtime event is internal failure, breakdown cover (and BI linked to it where appropriate) can be critical.
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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 specialist repairs, parts lead times, replacement/commissioning, calibration, and the time needed to rebuild normal turnover. Many precision manufacturers choose 18–24 months, depending on resilience and dependency on specific machines.
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What should I declare about exports and overseas customers?
Declare where your products are sold and used, whether you export directly, and whether your customers export your parts in finished systems. Your policy territory and jurisdiction wording must match your exposure. USA/Canada exposure often needs specific underwriting.
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Can Insure24 review my current policy against this checklist?
Yes. We can review your current programme, your activities, values, contracts and territories, and highlight likely gaps (limits, wording, breakdown/BI structure, underinsurance). We can then approach specialist insurers with a clear risk presentation to improve terms and coverage alignment.