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THE ESSENTIAL INSURANCE STACK FOR PRECISION ENGINEERING
Precision engineering businesses carry a particular risk profile: high-value machinery, tight tolerances, one-off or short-run parts, demanding customer contracts, and supply chains where a single late or faulty component can cause major downstream disruption. The right insurance programme is not just “a policy” — it’s a set of covers that protect your people, your premises, your machines, your products, and your contractual responsibilities.
This guide breaks down the covers most precision engineering manufacturers typically need in the UK, the common gaps we see in real claims, and how to structure insurance so it supports procurement, audits and growth.
Quick answer: what cover is usually needed?
Most precision engineering manufacturers typically need: Employers’ Liability (usually compulsory), Public & Products Liability, Property (buildings/contents/stock), and Business Interruption. Depending on your operation, you may also need Machinery Breakdown, Professional Indemnity (if you design/specify), Goods-in-Transit, Tooling / Customer Goods, Cyber, Management Liability, and Product Recall/Remediation where appropriate.
The best way to structure insurance is around your highest-severity risk: a serious injury event, a major fire, a critical machine failure, or a product failure causing significant third-party damage. Insure24 helps you match covers, limits and wordings to those “worst realistic days”.
1) Employers’ Liability Insurance (Usually Compulsory)
Employers’ Liability (EL) insurance protects your business if an employee is injured or becomes ill due to their work and makes a claim for compensation. Precision engineering workshops can involve rotating and cutting equipment, swarf, sharp edges, coolants, oils, noise and vibration exposure, forklifts, overhead lifting, and manual handling of heavy parts and tooling. These exposures make EL one of the most important covers for any engineering employer.
EL cover usually includes the cost of legal defence as well as damages/settlements where you are legally liable, subject to the policy terms and conditions. Underwriters typically assess EL using your wage roll (often split between manual and clerical staff), claims history, and the strength of your HSE controls. For precision engineering, insurers also consider the “severity potential” of your machinery and the culture around guarding and lock-off procedures.
Common EL exposures in precision engineering
- CNC lathes/mills, grinders, saws and rotating equipment
- Presses and automated lines (interlocks/guarding expectations)
- Manual handling of billets, bars, castings and finished parts
- Forklifts, pallet movement and loading bays
- Coolants, oils, cleaning chemicals and dermatitis exposure
- Noise/vibration exposures and occupational health considerations
- Apprentices, temps and labour-only subcontractors
What helps underwriting (and claim defence)
- Training records, authorisations and supervision for machine operators
- Planned maintenance logs and defect reporting
- Guarding standards, lock-off/tag-out procedures
- Traffic management and pedestrian segregation
- COSHH assessments, PPE issuance and extraction maintenance
- Near-miss reporting and corrective action evidence
When an incident happens, evidence quality is everything. We help you position your controls clearly so insurers understand the risk and can offer broader terms.
2) Public Liability & Products Liability
Public Liability (PL) covers third-party injury or property damage arising from your business activities. In a precision engineering context, this could be a visitor slipping in a workshop area, a delivery driver injured on your premises, or accidental damage to a third-party’s property during loading/unloading or site work.
Products Liability covers third-party injury or property damage caused by products you manufacture or supply. This is crucial for precision engineering because your components may be used inside customer machinery, assemblies, vehicles, industrial systems or safety-critical environments. Even if you manufacture “to print”, a tolerance issue, wrong material, or incorrect process can lead to a failure event and significant third-party damage.
Insurers will want to understand what you make, where it goes, and how it’s used. The more critical the end use (or the more expensive the downstream consequences), the more important it is to have correct product descriptions, territories, limits and quality evidence.
Typical PL / Products exposures
- Component failure causing damage to customer plant/machinery
- Assembly failure leading to third-party property damage
- Products supplied into automotive, aerospace, rail, medical or industrial sectors
- On-site installation or commissioning work (if you do it)
- Exports creating jurisdiction/territory exposure
If you export, ensure your policy territory matches where goods are sold/used — and that contracts don’t force you into uninsurable indemnities.
What insurers ask about (and why)
- Are parts safety critical or used in high-consequence environments?
- Do you hold ISO 9001 or similar quality standards?
- What traceability exists (batch/work order/material certs)?
- What inspection/test regimes are used (CMM, gauges, sample plans)?
- Do you alter designs/specifications or only manufacture to print?
Strong QA and traceability don’t just reduce defects — they reduce the scale and cost of any remediation event.
3) Property Insurance: Premises, Machinery, Stock, Tooling
Property insurance protects your physical assets against insured events such as fire, flood, theft and accidental damage (depending on the policy). In precision engineering, the most valuable assets are often not the building — they’re the CNC machines, grinders, EDM equipment, compressors, extraction, metrology equipment, fixtures, tooling, and stock/materials.
The most common property mistake is underinsurance. A single high-spec CNC machine can cost far more than businesses assume, and replacement lead times can be long. If your sums insured don’t match true replacement cost (and your policy includes average/underinsurance clauses), claim settlements can be reduced. That’s why accurate schedules and realistic valuations are essential.
What should typically be insured
- Buildings (owned) or tenant improvements (leased)
- Contents: racking, benches, hand tools, office kit
- Plant & machinery: CNC, EDM, grinders, compressors, extraction
- Stock & materials: metals, components, WIP, finished goods
- Tooling, jigs and fixtures (including high-value one-offs)
- Computer equipment: CAD/CAM workstations, servers (where relevant)
If you hold customer-owned tooling or components, you may also need “customer goods” cover — which sits slightly differently from standard stock.
Underwriter focus areas (what affects terms)
- Fire precautions, housekeeping and waste management
- Hot works controls (welding, cutting, grinding near combustibles)
- Electrical risk management and maintenance practices
- Security: alarm type, locks, CCTV, keyholder response
- Flood exposure and resilience measures (where relevant)
- Storage of oils/chemicals and bunding/spill controls
We help you present the risk clearly so you avoid unnecessary warranties — and so claims aren’t slowed down by missing information.
4) Business Interruption (BI): Protect Your Margin During Downtime
Business Interruption insurance protects your gross profit and helps cover ongoing costs when an insured event disrupts production. Property insurance can repair/replace damaged assets — but BI is what helps you survive the recovery period.
Precision engineering is particularly exposed to downtime because capacity is often concentrated in a few critical machines, and customers can be intolerant of delivery delays. A fire, flood or major damage event can stop production and lead to missed orders, lost contracts and long-term revenue impact. BI can also provide “increased cost of working” cover — funding overtime, subcontracting, hire-in equipment, or temporary premises — to keep deliveries moving.
The most important BI decisions are the gross profit basis and the indemnity period. Many manufacturers need 12–24 months (or longer) where replacement machinery is specialist and lead times are extended.
BI usually helps with
- Lost gross profit following insured damage (e.g., fire/flood)
- Ongoing fixed costs while output is reduced
- Increased cost of working to maintain production/deliveries
- Costs linked to shifting production or outsourcing temporarily
- Recovery periods driven by machine lead times and commissioning
BI pitfalls we regularly fix
- Indemnity period too short for realistic recovery
- Gross profit figure based on turnover rather than margin
- No allowance for increased cost of working / subcontracting
- Ignoring a single critical machine as a bottleneck
- Not accounting for extended commissioning/validation cycles
We’ll help you shape BI around your actual recovery plan — not a generic template.
Specialist Covers Precision Engineering Manufacturers Often Need
Once the core covers are in place (EL, PL/Products, Property and BI), the next step is to match specialist covers to how you actually operate. These are the covers that often decide whether you pass customer audits, satisfy contractual terms, and avoid expensive “grey areas” when something goes wrong.
Machinery Breakdown / Engineering Breakdown
Machinery breakdown insurance covers sudden mechanical or electrical failure (distinct from property perils like fire and flood). For precision engineering firms reliant on CNC machines, EDM equipment, grinders, compressors and extraction, breakdown can be a major operational threat. Some policies can be structured to include business interruption following breakdown — which is powerful where one machine is the bottleneck for throughput.
- Repair/replacement costs following breakdown events (policy dependent)
- Optional BI due to breakdown where arranged
- Ideal for single points of failure and high-cost machinery
Professional Indemnity (PI) for Design / Specification Risk
If you design parts, modify drawings, provide technical advice, sign off specifications, or act as the “design authority”, products liability alone may not be enough. Professional Indemnity is designed for allegations of negligence in professional services/design that lead to financial loss, rework, project delays or performance failures.
- Relevant when you design, specify or provide engineering advice
- Common in prototype work and engineered-to-order projects
- Contract review matters: fitness for purpose clauses and indemnities
We’ll help you map responsibilities clearly: build-to-print vs design-and-manufacture.
Goods-in-Transit (Components, Tooling & Finished Goods)
Precision components and tooling can be high value and fragile. Transit cover protects goods while being delivered in your vehicles, sent by courier, or moved between sites. The key is setting realistic “any one vehicle/consignment” limits that reflect peak shipments, and aligning policy wording with how you ship (couriers, pallet networks, own vans).
- Cover for loss/theft/damage in transit (subject to terms)
- Match limits to peak shipments, not averages
- Understand unattended vehicle and security conditions
Tooling / Customer Goods (Care, Custody & Control)
Many precision engineering businesses hold customer-owned tooling, moulds, dies, jigs or fixtures — sometimes worth tens or hundreds of thousands. Standard property policies may not automatically cover customer property, and liability policies often have limitations for items in your care. A tailored structure is needed to protect customer goods, demonstrate compliance to customers, and avoid disputes after a loss.
- Cover for customer-owned items stored at your premises (where arranged)
- Cover for customer goods while being worked on (wording dependent)
- Clear registers and agreed values help avoid friction
Cyber & Data (ERP/MRP, CAD/CAM, CNC Programs)
Precision engineering increasingly relies on digital systems: ERP/MRP scheduling, CAD/CAM files, CNC programs, inspection data, and customer specifications. Cyber insurance can support incident response, restoration, and certain business interruption scenarios (wording dependent). Insurers usually want to see basic controls: MFA, secure backups, patching, access controls and supplier discipline.
- Support for ransomware and business disruption (policy dependent)
- Helps fund incident response, forensics and recovery
- Complements ISO/IT controls where present
Management Liability (D&O) and Legal/HR Support
As you grow, management liability becomes more relevant: allegations against directors, employment disputes, regulatory investigations and governance exposures. For firms seeking external investment, larger contracts, or operating in regulated supply chains, management liability can be part of an “audit-ready” insurance package.
- Directors & Officers protection (wording dependent)
- Employment practices exposures (optional/wording dependent)
- Useful as headcount and contract value increases
Product Recall / Remediation (When Appropriate)
For some precision engineering supply chains, recall/remediation cover may be relevant — particularly where parts are supplied in volume or into safety-critical applications. Recall cover is designed for the practical costs of withdrawing or remediating products (notification, logistics, disposal, rework), subject to policy terms. It is not needed for every business — we help assess whether your product profile justifies it.
- Best fit for higher-volume or high-consequence supply chains
- Underwriting focuses on QA, traceability and prior issues
- Can complement products liability where operational costs are significant
Environmental / Pollution (Where You Store Oils/Chemicals)
If you store oils, coolants, chemicals, or have waste-handling exposures, you may need to consider environmental liability. Standard PL may not be designed for all pollution scenarios. If your site has higher exposure, bunding/spill controls and specialist cover may be relevant.
- Relevant for higher chemical/oil storage and spill risk
- Supports stronger audit and underwriting presentation
- Often driven by customer requirements or site sensitivity
How to Choose the Right Limits (So You Pass Audits and Avoid Gaps)
Precision engineering contracts often come with specific insurance requirements: minimum liability limits, territories (UK/EU/worldwide), endorsements, and evidence packs. The right approach is to align limits with contract requirements and your realistic worst-case exposures, rather than guessing or simply renewing last year’s limits.
The “forgotten limits” are often the ones that cause problems: goods-in-transit any one consignment, customer tooling values, BI indemnity periods, and breakdown exposure for critical machines. These aren’t always obvious until a claim happens.
Common contract asks
- Employers’ Liability: £5m or £10m
- Public / Products Liability: £2m / £5m / £10m
- Territory: UK/EU/Worldwide depending on export and customer base
- Evidence: certificate, schedule, endorsements
- Quality expectations: ISO 9001 evidence, traceability and inspection controls
Limits that are often overlooked
- Customer tooling and goods “in your care” limits
- Goods-in-Transit “any one vehicle/consignment” limit
- Business Interruption indemnity period (often 12–24 months+)
- Machinery breakdown limits on critical equipment
- Single item limits (high-value prototypes/tooling)
Insure24 can help you build a simple compliance pack so procurement requests are easy to handle.
“We had good cover, but the contract audit flagged missing tooling and transit limits. Insure24 restructured everything around our real shipments, customer-owned tools and critical machines.”
Managing Director, UK Precision Engineering ManufacturerFREQUENTLY ASKED QUESTIONS
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What are the minimum insurances a precision engineering business needs in the UK?
Most precision engineering manufacturers typically need Employers’ Liability (usually compulsory if you employ staff), Public Liability, Products Liability, and property insurance for premises, machinery, contents and stock. Many also need Business Interruption to protect gross profit after insured damage.
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Do I need Products Liability if I manufacture to customer drawings?
Often yes. Even build-to-print components can cause third-party property damage or injury if they fail due to manufacturing error, wrong material, or tolerance issues. Insurers will look at end use, exports, and your QA/traceability.
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What’s the difference between Products Liability and Professional Indemnity for engineers?
Products Liability is generally aimed at third-party injury/property damage caused by products. Professional Indemnity is relevant where you provide design/specification advice or professional services and a customer alleges negligence leading to financial loss, rework or delays.
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Should precision engineering firms buy Machinery Breakdown cover?
Many do, especially where one or two CNC machines are critical to throughput. Property cover usually focuses on fire/flood/theft-type perils, while machinery breakdown is designed for sudden mechanical/electrical failure. Some policies can add business interruption following breakdown.
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How do I insure customer-owned tooling stored at my workshop?
Customer-owned tooling often needs dedicated cover or specific extensions, with agreed values and clear registers. Standard property policies may not automatically cover customer goods, and liability policies can have limitations. Insure24 can structure cover to match your contracts and exposures.
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Do I need Goods-in-Transit insurance if I use couriers?
Often yes. Courier compensation can be limited and may not reflect the true value of precision components or tooling. Transit insurance can be structured to cover goods moved in own vehicles and/or by couriers, with limits aligned to peak consignments and security conditions.
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What liability limits do precision engineering customers usually require?
Common procurement requirements include Employers’ Liability at £5m or £10m and Public/Products Liability at £2m, £5m or £10m. Exporting or supplying high-consequence sectors may influence limit choices and territory requirements. Contract review is important.
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How quickly can Insure24 arrange insurance for a precision engineering manufacturer?
Many quotes can be produced quickly once key details are confirmed: turnover, wage roll split, processes, premises and security, machinery values, territories/exports and claims history. Specialist areas (design PI, high-value tooling/transit, complex processes) may need additional underwriting detail.