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COVER BUILT FOR PROTOTYPE & PRECISION WORKSHOPS
Why Prototype & Low-Volume Engineering Needs Specialist Insurance
Prototype and low-volume precision engineering isn’t “standard manufacturing”. You often work to tight tolerances, short lead times, and changing specifications. A single damaged jig, a spindle failure on a critical CNC, or a fire affecting work-in-progress can wipe out weeks of effort and create immediate contractual pressure. Many firms also carry significant exposure around customer property, design input, and “fitness for purpose” expectations — particularly when you support R&D, aerospace supply chains, motorsport, medical devices, energy, automation, or specialist industrial projects.
Prototype & Low-Volume Precision Engineering Insurance (UK)
This page is designed for UK precision engineering businesses that focus on prototypes, R&D builds, small batch production, and bespoke components. That includes machine shops, CNC milling/turning specialists, toolmakers, fabricators, prototype labs, additive manufacturing workshops, and engineering firms that support product development and early-stage production runs.
The insurance needs of prototype and low-volume operations are often different to high-volume manufacturing. Your value isn’t only in stock — it’s in skilled labour, setup time, specialist tooling, fixtures and jigs, metrology, programming, and the ability to deliver complex parts accurately. Risk is often “concentrated” in a small number of high-value jobs at any one time, with one-off parts and limited opportunities to spread cost across volume.
Insure24 helps you build cover that matches how you actually operate: from property and equipment breakdown, to liability and professional risks, to cover for customer property, contract works, and goods in transit where applicable.
- Precision tooling & high-value equipment – CNCs, spindles, metrology kit, CMMs, tooling, and fixtures.
- Customer property exposure – customer-owned materials, tooling, patterns, and components on your premises.
- Prototype WIP concentration – one project can represent a major portion of your monthly output.
- Design/spec involvement – drawings, tolerances, advice, and manufacturing design input can trigger PI exposure.
- Contract-driven liability – “fitness for purpose”, warranties, and liability caps often appear in supply terms.
- Short lead times – downtime can quickly become a delivery failure and customer dispute.
What Insurance Does a Prototype / Low-Volume Precision Engineering Business Need?
Most precision engineering firms need a structured package rather than a single “one size fits all” policy. Your ideal setup depends on your premises, the value of your plant and tooling, whether you hold customer property, whether you provide design input, and what your contracts require. Below is a practical breakdown of the main covers and how they apply to prototype and low-volume work.
Property Cover (Buildings, Contents, Tools, Stock & WIP)
Property cover protects your premises and physical assets against insured events like fire, flood, escape of water, storm and theft. For prototype and low-volume businesses, the critical conversation is usually about contents definitions and values: CNC machines, tooling, fixtures, measuring equipment, and specialist kit must be insured correctly and at the right basis (replacement cost).
- Tools, dies, jigs and fixtures – often higher value than expected and easy to underinsure.
- Metrology equipment – CMMs, calibration kit, laser measurement, inspection benches.
- Stock and materials – metals, composites, specialist materials, consumables.
- Work in progress – prototypes and jobs mid-process; peaks can be contract-driven.
- Theft conditions – ensure security aligns with insurer expectations.
Machinery Breakdown & Downtime Protection
A single machine outage can cripple a prototype shop — especially if one CNC or one spindle is your “single point of failure”. Machinery breakdown cover is designed for sudden mechanical/electrical failure, while business interruption and increased cost of working can help protect cashflow and fund mitigation steps.
- Breakdown cover – repairs to insured plant following sudden failure (subject to wording).
- Lead times – specialist parts and engineer availability can extend downtime.
- Extra costs – outsourcing machining, overtime, hire equipment, urgent shipping.
- Utilities dependency – compressed air, power quality, cooling and extraction systems.
- Maintenance evidence – supports underwriting and reduces disputes.
Employers’ Liability & Health & Safety
If you employ staff, employers’ liability is compulsory in most cases. Precision engineering environments also face H&S exposures: manual handling, cutting fluids, swarf, noise, vibration, extraction requirements, welding/fabrication hazards, and machine guarding. Insurers want to see that risk is managed properly and that training and safety procedures exist.
- EL limits – typically set by market standard and contract requirements.
- Safety controls – guarding, lockout/tagout, PPE, training, and supervision.
- Hot works – if applicable, ensure it’s disclosed and controlled.
Public & Products Liability
Public liability covers injury/property damage to third parties, while products liability covers injury/property damage caused by your products after supply. Prototype businesses may have lower volume, but the severity of a failure can be high depending on end-use. It’s also important to understand what liability policies typically don’t cover (e.g., pure financial loss).
- Contract-driven limits – OEM and tier suppliers often request specific limits.
- Products “end-use” – safety-critical components can change insurer appetite.
- Heat work / work away – disclose on-site work and fabrication risks if applicable.
- Territory/jurisdiction – important for export and overseas supply chains.
Professional Indemnity (PI) for Prototype & Precision Engineering
Many prototype and precision engineering firms do more than “make to print”. You may advise on tolerances, material choice, manufacturability, prototyping approach, or even provide design modifications. That’s valuable — but it can create professional negligence exposure. Professional Indemnity insurance is designed to respond to claims alleging negligence in professional services (design/spec/advice) and financial loss.
A common gap occurs when a business assumes products liability will respond to a dispute — but the allegation is about specification, advice, or a professional duty that caused financial loss (rework costs, delay costs, project failure). If you provide any design input, PI should be discussed.
“Our biggest risk wasn’t ‘stock’ — it was one-off WIP, customer tooling, and the one CNC that everything depended on. Once the cover was structured properly, we stopped worrying about one incident wiping out months of work.”
Owner, UK Precision Engineering WorkshopCustomer Property, Tooling, Patterns & “Goods Held in Trust”
Precision engineering businesses frequently hold items that belong to customers: tooling, dies, moulds, fixtures, prototypes, specialist materials, or part-finished assemblies. These are often the most expensive things on site — and they may not be covered automatically under standard “contents” unless the policy definitions and sums insured account for them.
If you hold customer property, you need to consider two angles: (1) first-party cover for loss/damage to the property while on your premises, and (2) liability if you are alleged to be legally responsible for loss/damage. The ideal solution depends on your contracts and how you hold/record customer assets.
Common Gaps We See
- Customer tooling not declared – the policy only covers your own property.
- Low sub-limits – a small “customers’ goods” limit that doesn’t reflect reality.
- Unclear records – insurers struggle to validate what was on site at the time of loss.
- Incorrect basis of valuation – replacement costs and lead times not considered.
- Offsite storage – customer goods stored elsewhere not included without extension.
How to Strengthen the Risk (and Improve Terms)
- Asset registers – list customer tooling and high-value items with photos and identifiers.
- Segregation – clearly label and separate customer-owned property.
- Fire risk controls – housekeeping, extraction, hot works controls (if applicable).
- Security – alarms, access control and secure storage for small high-value items.
- Contract review – understand where liability sits for loss/damage to customer items.
Practical tip: treat customer tooling like cash. If a fire occurred tonight, could you prove what was on site, what it was worth, and who owned it? That documentation can be the difference between a smooth claim and a dispute.
Contracts, Quality, Tolerances & Dispute Risk
Prototype and low-volume precision work is susceptible to disputes because requirements evolve. A drawing changes, tolerances tighten, materials change, or a prototype fails in testing and everyone asks “why”. Insurance doesn’t replace good contracts and QA — but the right cover can protect you when a dispute turns into an allegation of negligence or liability.
Common pressure points include: acceptance criteria, measurement methods, tolerance stack-ups, surface finish requirements, traceability, material certification, and changes agreed verbally rather than recorded. The result can be rework, remake, schedule impact, and allegations of financial loss.
Typical Risk Scenarios
- Tolerance dispute – measurement method differs from customer expectation.
- Prototype performance failure – allegation that design/manufacture caused downstream costs.
- Material / certification – paperwork gaps or incorrect grade used.
- Surface finish / coating – specification not met leading to functional issues.
- Change control failure – drawing revision not captured or old revision used.
- Customer tooling damage – fixture/jig damaged during machining or handling.
Risk Management That Also Helps With Premiums
- Documented change control – signed drawing revision acceptance and job travellers.
- Inspection records – CMM reports, first article inspection, and calibration evidence.
- Traceability – material certs, batch tracking, and job documentation.
- Clear scope & exclusions – define what you are and aren’t responsible for.
- Contract clause review – watch for fitness for purpose and broad indemnities.
- Packaging for dispatch – prevent transit damage and protect finished parts.
PROTECT YOUR BUSINESS
- Property, contents, stock and WIP protection aligned to prototype workflows
- High-value tooling, jigs, fixtures and metrology equipment correctly insured
- Customer property / goods held in trust arranged and documented properly
- Breakdown and downtime solutions for single-point-of-failure machinery
- Liability and (where needed) professional indemnity for design/spec/advice exposure
- A joined-up programme built around contracts, sectors and real-world operations
FREQUENTLY ASKED QUESTIONS
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Do prototype and low-volume engineering firms need different insurance to high-volume manufacturers?
Often, yes. Risk is frequently concentrated in high-value WIP, customer tooling, specialist equipment and short lead times. Policies should reflect
customer property exposure, the true replacement cost of tooling and metrology equipment, and downtime impact where one machine can stop output.
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Is customer tooling automatically covered under my contents insurance?
Not always. Many policies focus on your own property unless “customers’ goods” or “goods held in trust” are included with suitable limits and definitions.
If you hold high-value customer tooling, it should be declared and documented to avoid gaps at claim time.
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What’s the biggest cause of claim reductions for precision engineering businesses?
Underinsurance is a big one — especially on plant, tooling, jigs/fixtures and peak WIP. Another common issue is missing extensions for customer property,
work away/installation, or incorrect territory/jurisdiction where goods are exported.
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Do I need Professional Indemnity if I “only” manufacture prototypes?
If you provide design input, specifications, tolerancing advice, manufacturing design guidance, or technical sign-off, Professional Indemnity may be relevant.
Products liability typically focuses on injury/property damage; PI addresses professional negligence and financial loss allegations.
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Can machinery breakdown cover my CNC if a spindle fails?
Machinery breakdown is designed for sudden and unforeseen mechanical/electrical failure (subject to policy terms). Wear and tear and gradual deterioration
are commonly excluded, and insurers may expect reasonable maintenance. The CNC also needs to fall within the defined/scheduled equipment.
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What information do you need to quote prototype/low-volume engineering insurance?
Typically: turnover, activities (CNC, fabrication, additive, design input), premises details, values of plant/tooling/metrology, peak stock/WIP values,
whether you hold customer property (and typical values), contract requirements, any overseas sales, and claims history.
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Can you cover parts while they’re being delivered to customers?
Yes, typically via goods in transit or marine cargo insurance (for exports). Property cover usually focuses on goods at your premises, so if deliveries
are frequent or high value, transit insurance should be considered.
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How can I reduce risk and improve my insurance terms?
Insurers respond well to strong housekeeping and fire controls, documented maintenance, calibration records, clear change control, traceability,
secure storage for high-value tooling, and accurate asset registers (including customer property). These steps improve resilience and often help pricing.