Why Do Machine Shops Need Insurance?
Do you manufacture tools and equipment? Do you craft or repair parts for existing machinery? Do you provide delivery for your customers? A machine shop can provide a wide variety of services for their customers. But that also means machine shop owners like you can face a wide amount of risks in their business operations.
Here are just a few examples of the liability exposure machine shop businesses might face:
- Equipment breakdowns
- An employee gets hurt by a machine
- A customer is injured on your premises
- One of the parts you manufacture is defective
You need the proper machine shop insurance coverage to protect your business, your employees, and your customers.
What Machine Shops Need Coverage?
There are a wide range of machine shops and services offered, but here are a few examples of business types that may need this coverage:
- Metal working machine shops
- Plastic manufacturing shops
- CNC/Robotic machine shops
- Aircraft industry machine shop
- Equipment repair/parts shops
If you fall into the category of a machine shop, there are a few machine shop insurance coverages you should consider.
What Insurance Does a Machine Shop Need?
Some insurance policies are essential for a machine shop's insurance needs. What are they?
General Liability Insurance
General liability insurance (also known as “slip & fall” insurance) protects your business if a customer or their property is injured. It also protects your business if you slander another company or break copyright law.
- Third-Party Bodily Injury: If a customer slips and falls while touring your shop, general liability will pay for their medical expenses and a settlement if they sue you for negligence.
- Third-Party Property Damage: The same customer smashes their phone when they fall. A general liability policy will pay to repair the damage to their personal property or replace it outright.
- Personal And Advertising Injury: If a competitor alleges that you slandered them or broke copyright law, they can sue you for damages. A general liability insurance policy can help cover legal fees, the expense of a lawyer, and even a potential settlement.
Product Liability Insurance
Product liability is necessary to cover the following products liability exposure(s):
- Product defects
- Product tampering
- Deceptive marketing
Example: If you manufacture parts for equipment and they are found to be faulty or defective, you can be held liable for any damage or injury they may cause. If you provide a service such as parts manufacturing and equipment repair and your work is deemed sub-par, you fall into the same boat. You need this insurance to protect your small business from liability claims and any financial consequences.
Commercial Property Insurance
Commercial property insurance can protect the building you work in, expensive equipment, and inventory within your machine shop from damage from fire, theft, natural disasters (tornadoes, hurricanes, wind, hail, etc), and vandalism. Any of these circumstances can quickly bankrupt businesses, which is why it's such important coverage.
You’ll need to take inventory of your important equipment like metal lathes, milling machines, drill presses, grinding machines, CNC machines, production machinery, and other expensive equipment and tools.
Example: A fire breaks out in your shop and damages a chunk before firefighters can put it out. Some of your expensive equipment is unable used and must be replaced. A commercial property insurance policy will pay for the cost to repair the building and replace your damaged equipment.
Workers’ Compensation Insurance
One employee-related coverage your business needs is workers’ compensation insurance. If one of your employees gets injured while at work, this policy provides compensation for their medical expenses and lost wages for a period of time. Workers' comp insurance also protects you from liability for the injury.
What other employee-related coverages do you need?
- Employment Practices Liability Insurance: If an employee accuses the machine shop owner or a manager of harassment, discrimination, wrongful termination, etc. employment practices liability insurance can cover the cost of a legal defense and any settlement.
- Employee Dishonesty Coverage: Also referred to as crime insurance, employee dishonesty protects your machine shop from financial losses if an employee were to steal money, inventory, equipment, etc.
Example: One of your employees gets their arm caught in a machine and is severely hurt. Workers' compensation will pay for the medical expenses associated with his injury as well as lost wages while the employee is recovering.
Something you can also consider offering for your employees is life insurance.
Other Insurance for Machine Shops
Some other important insurance solutions to protect you and your business include:
- Equipment Breakdown Coverage: If your equipment breaks down due to an electrical surge or equipment malfunction, an equipment breakdown insurance policy can pay the cost to repair the machinery.
- Inland Marine Insurance: If you are transporting tools and/or equipment to do an on-site repair, this protects your tools/equipment while in transit and while being stored at a job site.
- Business Interruption Insurance: If your property is damaged and you cannot operate, business interruption can help cover operating expenses, payroll, taxes, lost profits, and in some cases will cover the cost of a temporary location.
How Much Does Machine Shop Insurance Cost?
Insurance for machine shops can be affordable. General liability insurance can cost as low as $39 a month for a machine shop and goes up each additional coverage that is added. Some things that may impact the cost of your policy include:
- Location of your business
- The risks associated with your industry
- The products that you manufacture
- How many employees you have
- Annual revenue and payroll
- The equipment that you use
- The insurance company you choose
There are many other factors that insurance carriers take into consideration, which is why we always recommend speaking with a knowledgeable insurance agent to help you determine the necessary business insurance coverage.
Get a Free Machine Shop Insurance Quote
If you’re in the market for business insurance quotes, searching for a new insurance carrier, or simply have questions, we’d love to help! Our goal at Tivly is to make this process fast, easy, and affordable for you and make a difference for your manufacturing business. You can get a quote by completing the form at the top of the page. Or you can give us a call at 877-907-5267 and one of our agents will gladly assist you in finding a solution for your machine shop insurance.
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