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DOWNTIME IS OFTEN THE BIGGEST FINANCIAL RISK
Machine Downtime & Production Delay: What This Page Covers
For precision engineering and manufacturing businesses, the biggest financial loss is often not the repair bill — it’s the lost production time. When a key machine fails, a factory can quickly fall behind schedule, miss contract milestones, breach delivery windows, and face urgent customer pressure. Even where you can repair the machine, the knock-on effects can include overtime, outsourcing, scrap, express shipping, and lost future orders.
This page explains the insurance options that can help manage downtime and delay risk, including: machinery & equipment breakdown, business interruption, and how to structure “downtime protection” so it matches your real operations. We also cover practical risk planning (spares, service contracts, utilities resilience, and contingency plans) because downtime risk is best managed with a combination of insurance and operational resilience.
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What Is Machine Downtime & Production Delay Risk?
Machine downtime risk is the likelihood that a key asset (or supporting utility) fails and stops or reduces production. Production delay risk is the financial and contractual impact of that downtime: missed deadlines, lost revenue, penalties, dissatisfied customers, and the costs of recovering production capacity.
Downtime can be caused by external events (fire, flood, theft, power issues) or internal events (mechanical/electrical breakdown, control system faults, coolant/chiller failures, compressor failure, hydraulic failure). For many precision engineering firms, a small number of machines are “single points of failure” — if one goes down, throughput drops dramatically.
The Downtime Protection Stack (How Cover Usually Fits Together)
Downtime risk is rarely solved by one policy. It’s usually a “stack” of covers that respond to different causes of loss. We build programmes that link property, breakdown and business interruption so the right policy responds to the right trigger.
Core Policies That Can Respond
- Property Damage – for insured perils like fire, flood, storm, escape of water, theft (as insured)
- Machinery & Equipment Breakdown – for sudden internal mechanical/electrical failure
- Business Interruption – loss of gross profit / income following insured damage or breakdown (if included)
- Increased Cost of Working – to fund outsourcing, overtime, temporary solutions (within BI)
- Goods in Transit – if delays arise from loss of high-value goods while moving
The key is ensuring your programme includes downtime cover for the causes that would realistically stop you producing.
Why It’s Commonly Misconfigured
- BI arranged for fire/flood only, but most stoppages come from breakdown
- Indemnity period too short for specialist repairs/parts lead times
- Understated gross profit / turnover leads to underinsurance
- Key machines not properly declared or valued
- Utilities and supplier/customer dependency not considered
We focus on “what would actually stop you” and model the recovery timeline so the cover is realistic.
Machinery & Equipment Breakdown: The Downtime Trigger Most Manufacturers Miss
Standard property insurance is built around external perils such as fire, flood and theft. But in precision engineering, the most common reason production stops is internal failure: spindle failure, drive/motor burnout, arcing, control faults, hydraulic/pneumatic failure, compressor/chiller breakdown. Machinery breakdown insurance (also called engineering breakdown) is designed for sudden and unforeseen mechanical or electrical failure.
Typical Breakdown Scenarios
- Spindle or bearing failure causing machine stoppage
- Electrical arcing/short circuit damaging drives or controllers
- Hydraulic failure causing axis damage or clamping failure
- Compressor failure stopping air tools and automation
- Chiller failure leading to temperature control problems and stoppage
- Control system faults (PLC/CNC controller) halting production
The right breakdown cover can pay for repair/replacement costs — and, when structured properly, support downtime loss via BI extensions.
What Breakdown Often Doesn’t Cover
- Wear and tear / gradual deterioration
- Known defects not addressed
- Poor maintenance or lack of servicing evidence
- Consumables unless damaged by an insured event
- Cyber-caused shutdown unless insured separately
A good maintenance regime and documentation can improve insurer confidence and reduce coverage disputes at claim time.
Business Interruption: Protect Turnover, Not Just Machines
Business interruption (BI) is the financial engine of downtime protection. It’s designed to protect your gross profit / income when you cannot trade normally due to an insured event. For manufacturing, BI can be more valuable than the repair bill — because downtime destroys revenue while costs continue.
Many businesses have BI linked only to property damage (fire/flood). But a downtime programme should consider whether BI is linked to machinery breakdown too, because breakdown is often the most likely trigger.
What BI Can Pay For
- Loss of gross profit / income due to reduced output
- Continuing expenses (rent, rates, key salaries, finance)
- Increased cost of working (outsourcing, overtime, extra shifts)
- Express shipping and urgent procurement (where included)
- Temporary premises or equipment hire (where feasible)
The aim is to keep your business stable while you recover production capacity.
Critical Choices: Indemnity Period & Sum Insured
Two choices determine whether BI actually works:
- Indemnity period: how long the policy can pay for loss
- Sum insured: the gross profit/turnover level insured
Manufacturing recovery times can be long: specialist repairs, parts lead times, commissioning, calibration, and the time to regain normal customer ordering. Many manufacturers need 18–24 months rather than 12 months, depending on resilience and supply chain dependence.
Contractual Delay Risk: What Insurance Can (and Usually Can’t) Do
Production delays often become contractual disputes. Customers may demand compensation, invoke contract clauses, or apply liquidated damages for late delivery. It’s important to be realistic: many contractual penalties are not “insured losses” under standard BI or liability policies.
However, insurance can still protect you in the ways that matter most: keeping your cashflow stable (BI), funding increased costs to recover production, and providing legal defence where a claim alleges negligence or liability.
Delay-Related Costs You Can Often Manage with Insurance
- Lost gross profit due to reduced output (BI)
- Overtime and outsourcing to meet deadlines (increased cost of working)
- Extra shipping / urgent procurement (where covered)
- Repair/replacement of damaged machinery (breakdown/property)
- Legal defence for allegations of negligence causing damage (liability)
Delay-Related Costs Often Not Covered
- Liquidated damages and contractual penalties (commonly excluded)
- Pure loss of reputation or “lost future contracts” (not a direct insured loss)
- Batch rejection/rework costs without injury/property damage
- Failure to deliver on time where no insured event caused the delay
- Supplier performance issues unless insured via contingent extensions
We help you identify what’s insurable, and how to manage the rest through contracts and operational resilience.
Downtime Risk Management (Insurers Love This)
The best downtime programme combines insurance with resilience. Insurers price uncertainty — so the more evidence you can show of maintenance, contingency plans and recovery capability, the better your pricing and terms are likely to be.
Practical Downtime Controls
- Planned maintenance schedules and service records
- Service agreements for key machines (response times and parts availability)
- Critical spares list (drives, motors, sensors, bearings, belts)
- Utilities resilience: compressors, chillers, extraction systems, backup options
- Supplier mapping and alternative outsourcing partners
- Production recovery plan (who does what in first 24–72 hours)
Documentation That Helps Underwriting
- Asset register with machine values and age profile
- Breakdown history and corrective actions taken
- Inspection/calibration records for critical processes
- Fire risk controls and electrical inspection evidence
- Business continuity plan and supplier dependency analysis
If you can show insurers you’re prepared, you reduce their perceived risk — which can mean better terms.
How Insure24 Quotes Downtime & Production Delay Risk Cover
We focus on the “critical path” in your production process: what must keep running for you to deliver on time? That informs how we structure property, breakdown and BI — and whether contingent (supplier/customer) extensions are appropriate.
What We’ll Usually Ask
- Turnover and gross profit information (to set BI sums insured)
- Key machines and utilities (values, age, maintenance approach)
- Single points of failure (what would stop production immediately)
- Typical repair times and parts lead times
- Outsourcing capability (can work be moved quickly?)
- Contracts with delivery windows and penalty clauses (for context)
What Often Improves Terms
- Strong maintenance regime and service contracts
- Critical spares strategy and supplier SLAs
- Clear asset register and realistic replacement values
- Electrical inspections and good housekeeping
- Contingency plan for production recovery
Good evidence reduces uncertainty — and uncertainty drives premium.
Why Choose Insure24 for Downtime & Production Delay Risk?
- Manufacturing-aware placement: We understand the critical path and single points of failure.
- Programme design: Align breakdown, BI, property and contingencies so the cover works together.
- Realistic BI settings: Help setting sums insured and indemnity periods to match recovery time.
- Contract context: We help you understand what’s insurable vs commercial penalties.
- Claims support: Practical support when speed and documentation matter most.
If you want a fast review of your downtime exposure and the right insurance structure, call us on 0330 127 2333.
FREQUENTLY ASKED QUESTIONS
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What insurance covers machine downtime for manufacturers?
Downtime is usually managed through a combination of machinery & equipment breakdown cover (for sudden mechanical/electrical failure) and business interruption cover (for loss of gross profit/income following an insured event). Property insurance can also trigger BI following perils like fire or flood.
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Is business interruption insurance the same as machinery breakdown?
No. Machinery breakdown covers repair/replacement after sudden mechanical or electrical failure. Business interruption covers the financial impact (loss of gross profit/income and increased costs to keep trading) following an insured trigger such as property damage or breakdown where included.
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Will insurance pay contractual penalties for late delivery?
Often no. Contractual penalties and liquidated damages are commonly excluded from standard insurance policies. However, insurance can still protect your cashflow through BI and fund increased costs of working to recover output, and may provide legal defence where there is an insured liability allegation.
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How long should my business interruption indemnity period be?
It should reflect worst-case recovery time, including repairs, parts lead times, commissioning/calibration and time to regain normal turnover. Many manufacturers need more than 12 months, often 18–24 months, depending on machine dependency and resilience.
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What information do insurers need to quote downtime protection?
Insurers typically want turnover and gross profit (for BI), details of key machines and utilities (values, age, maintenance), single points of failure, typical repair/parts lead times, outsourcing capability, and any relevant claims or breakdown history.
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Can Insure24 help structure breakdown + BI properly?
Yes. Insure24 can help design a downtime programme that links property, breakdown and BI to your real production risks, with realistic sums insured and indemnity periods, and guidance on what is typically insurable vs contractual penalty exposure.