Machine Shop Insurance Policy Information
Machine Shop Insurance. As a machine shop owner or operator, you offer a variety of products and services to the clients that you serve. For example, you might create unique items for your customers, or you may offer repair services for companies that utilize certain types of machinery.
Machine shops in receive unfinished parts from customers, generally manufacturers, and then grind, bore, or perform other processes based on the customers' specifications.
The traditional job shop does a low volume but offers high-quality work, such as grinding teeth into gear blanks or boring precision holes into forged or cast parts. Other job shops handle high-volume work, commonly using computerized (CNC) lathes to thread screws, bolts, and similar items.
Larger shops may provide expanded services to include such finish work as deburring, heat treating, or electroplating. The shop's specialty is often based on the equipment that they have available. Like contractors, they may bid on jobs and receive contracts with set terms and conditions.
No matter what the specifics of your business may be, as the proprietor of your machine shop, you have a lot of responsibilities and are liable for any mishaps and mistakes that can happen. In order to ensure that your employees and customers are safe and satisfied - and in order to ensure that your business is safe and you are protected - it's important to make sure that you carry the right type of insurance coverage.
If you've just opened your own shop, trying to navigate the world of insurance can be confusing. To help you make the best possible choices and to ensure that you are well protected, keep on reading to find out why insurance is so important and what type of machine shop insurance coverage you should invest in.
Machine shop insurance protects custom machining, electroplaters, foundries, machine parts manufacturers, or metal finisher operations from lawsuits with rates as low as $77/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked machine shop insurance questions:
- What Is Machine Shop Insurance?
- How Much Does Machine Shop Insurance Cost?
- Why Do Machining Shops Need Insurance?
- What Type Of Insurance Do Machine Shop Owners Need?
- What Does Machine Shop Insurance Cover & Pay For?
What Is Machine Shop Insurance?
Machine shop insurance is a type of commercial insurance that provides coverage to businesses operating in the machine shop industry. This insurance policy covers the potential risks and liabilities associated with the operation of a machine shop, including damage to or loss of machinery and equipment, liability for injuries to employees or third parties, and property damage caused by the operation of the machinery.
The coverage can also include protection for business interruption, product liability, and professional liability for errors and omissions in the repair and maintenance of machinery. The coverage is designed to protect machine shop owners and operators from financial losses caused by unexpected events and accidents that occur during their business operations.
How Much Does Machine Shop Insurance Cost?
The average price of a standard $1,000,000/$2,000,000 General Liability Insurance policy for small machine shops ranges from $77 to $89 per month based on location, size, payroll, sales and experience.
Why Do Machining Shops Need Insurance?
Running a machine shop can be extremely rewarding; however, it also comes with a lot of responsibilities. Third-parties or employees could become injured, your equipment could malfunction or become damaged, the property your shop is located in might be vandalized, or a client could file a lawsuit against you alleging that a member of your crew damaged their property.
The above-mentioned scenarios are just some of the incidents that could arise. If something serious should happen, as the proprietor of the business, you will be held liable.
That means that you could end up having to pay a significant amount of money in order to repair or replace damaged property, cover the cost of medical expenses, and pay for legal fees. Having to pay such costs could put you in financial ruin. Ultimately, you could end up filing for bankruptcy or even having to shut down your business.
Having the right type of machine shop insurance coverage will protect you from financial burden. Should a client become injured while visiting your shop and file a lawsuit, for example, commercial insurance will cover the cost of any necessary medical bills, as well as legal fees.
What Type Of Insurance Do Machine Shop Owners Need?
Do to the nature of owning and operating a machine shop, there are several different types of insurance policies that are recommended for individuals in this industry.
Some coverages are compulsory, meaning that you are legally required to carry them, and some are optional; however, it is strongly recommended that you consider investing in the policies that you aren't obligated to carry in order to avoid serious losses and financial hardship.
Some of the types of policies that machine shop owners should carry include:
- General Liability. You probably have a lot of heavy machinery at your shop. Should a customer, vendor, or any other third-party become injured by any piece of machinery, bodily injury insurance will help to pay for the necessary medical care. It will also help to cover the cost of legal fees should a lawsuit be filed against you.
- Commercial Property. This type of coverage protects your business - both the physical structure and the contents inside of it - should an act of nature or vandalism occur.
- Products and Completed Operations. If any of the products that you offer or the services that you provide malfunction and harm a customer after the service or purchase was completed, this type of insurance coverage will protect you.
- Workers' Compensation. When a member of your staff is injured on the job or suffers a work-related illness, workers' comp insurance will pay for the employee's medical care, lost wages, and even any job training that he or she might require. It can also cover legal fees, should the injured employee file a lawsuit against you.
These are just some of the different types of policies that machine shop owners should carry. You can purchase individual policies; or, you might be able to invest in a policy that lumps several different coverages together.
Machining Risks & Exposures
Premises liability exposure is higher than for other metal working operations as customers need to be on premises to review the process and to evaluate the ability of the firm to deliver the product desired. If customers put their own employees on site for quality control purposes, these employees are subject to the same hazards as the machine shop's employees. Other visitors may be injured by slips, trips, or falls. Fumes, dust, and noise from metal work could affect neighboring properties.
Products liability exposure may be very high if the final product is a critical operating part or system (such as parts for autos, aircraft, watercraft, military uses, or industrial machinery). The machine shop may be more concerned about their ability to handle the customer's specifications rather than evaluating the end use of the product and what could happen should the part fail.
It may be impossible to defend against questionable claims unless there is an aggressive quality control program including high standards for materials, testing and monitoring of components, and documentation of sources (often down to the individual item in a run). If the machine shop is following specifications provided by the customer, the contract may limit the exposure. Hazards increase without contracts that clearly describe the responsibilities of the machine shop and the quality standards that must be met for customer satisfaction. Older parts made before improved safety features were introduced may still be in use.
Environmental impairment liability exposure may be significant due to possible contamination of ground, air, and water from the chemicals, paint, and solvents used. Disposal of wastes must adhere to all federal and state guidelines.
Workers compensation exposure is moderate to high. Workers on a production line with punch presses and cutting machines can suffer severe loss from cuts or amputations as they push to meet quotas. Eye injuries from metal shavings and skin irritations from chemicals are additional causes of loss. Common injuries include slips, trips, falls, back injuries from lifting and material handling, hearing loss from noise, and repetitive motion injuries.
Workstations should be ergonomically designed. Employees should be provided with safety training and protective equipment. Jobs are bid and deadlines set with penalties if timeframes are not met. The high volume required for production schedules may lead workers to remove guards on the machinery, or to postpone maintenance and repair to increase production.
Property exposures consist of an office, production plant, and warehouse for storage of raw materials and finished goods. Ignition sources include electrical wiring, heating systems, production machinery, and sparks from grinding or lathe operations. Many stages of the work have low fire potential since most machines are cutting and punching devices, and the parts are all metal.
Grinding and lathe operations may generate dust and sparks that could cause a fire or explosion. The risk increases in the absence of proper dust collection systems, ventilation, and adequate disposal procedures. Degreasers and solvents may be flammable and must be adequately controlled. Poor housekeeping may be a serious fire hazard. Unless disposed of properly, greasy, oily rags (such as those used to clean the machinery) can cause a fire without a separate ignition source.
There is often a significant amount of property of others exposure that may be better insured on an inland marine bailees customers form. Business income can be a significant exposure if the machines are special-ordered for a specific job.
Equipment breakdown exposures include malfunctioning production equipment, electrical control panels, and other apparatus. A lengthy breakdown to production machinery could result in a severe loss, both direct and under time element.
Crime exposures are chiefly from employee dishonesty, especially for high-tech parts or exotic metals. Background checks should be conducted on all employees. There must be a separation of duties between persons handling deposits and disbursements and handling bank statements. The manufacturer should have security methods in place to prevent theft.
Inland marine exposures include accounts receivable if the manufacturer offers credit, bailees customers for goods belonging to others, computers (which may include computer-run production equipment), goods in transit, and valuable papers and records for customers' and suppliers' information. Items being treated that belong to customers are subject to the same causes of loss as property owned by the machine shop, plus transit and the processing itself. For goods in transit, the primary causes of loss are fire, theft, collision, overturn, and water damage.
Business auto exposure can be high if the machine shop picks up raw materials or customers' property or delivers finished parts. Deadlines placed on drivers (such as just-in-time processing schedules) increase the hazard. Drivers should be trained in handling whatever product they are required to carry, including the tie-down of unwieldy pieces of metal.
Manufacturers generally have private passenger fleets used by sales representatives. There should be written procedures regarding the private use of these vehicles by others. Drivers should have an appropriate license and an acceptable MVR. All vehicles must be well maintained with documentation kept in a central location.
What Does Machine Shop Insurance Cover & Pay For?
Machine shops are complex environments that handle a wide range of activities, from cutting and shaping metal parts to assembling machinery. Due to the nature of their work, they are susceptible to various forms of lawsuits. Here are a few reasons machine shops may face lawsuits, and how insurance could help manage these potential risks:
1. Personal Injury Claims: These are perhaps the most common lawsuits faced by machine shops. They arise when an employee, customer, or third party is injured due to a hazardous condition in the shop, such as improper maintenance, lack of safety measures, or faulty machinery. Insurance can help cover these costs through a General Liability Policy. This policy typically covers legal fees, court costs, and any settlements or judgments rendered against the business. It can also help with medical bills if a person is injured on your property.
2. Property Damage Claims: Machine shops typically use heavy machinery and hazardous materials that can potentially damage property. If a machine malfunctions and causes damage to a customer's property, or a fire breaks out due to improper handling of materials, the business could face a lawsuit. A Commercial Property Insurance policy can help cover the costs associated with such damage. This insurance can pay to repair or replace damaged property and may also cover legal costs associated with the claim.
3. Product Liability Claims: Machine shops manufacture parts that are used in various products and machinery. If a part is defective and causes harm or damage, the shop could face a product liability lawsuit. Product Liability Insurance is designed to protect businesses in such scenarios. It covers legal fees, settlements, and medical costs if a product causes injury or property damage.
4. Workers' Compensation Claims: If an employee is injured while working, they may file a workers' compensation claim. If the business disputes the claim, it could lead to a lawsuit. Workers' Compensation Insurance can help cover the cost of legal fees, medical expenses, and lost wages for the employee. Additionally, in many states, having this insurance can limit a business's liability in these situations.
5. Professional Negligence Claims: Sometimes, machine shops may face lawsuits alleging professional negligence - for instance, if a customer believes that the shop failed to perform to the standards of the industry and this failure led to a financial loss. Professional Liability Insurance (also known as Errors and Omissions Insurance) can help cover the legal defense costs, settlements, and judgments associated with these types of claims.
Insurance plays a vital role in protecting machine shops from potential financial ruin due to lawsuits. However, it's important to note that the best insurance policy is prevention: maintaining a safe working environment, providing appropriate training, and following industry standards can help prevent many of these issues from arising in the first place.
Commercial Insurance And Business Industry Classification
- SIC CODE: 3599 Industrial and Commercial Machinery and Equipment, Not Elsewhere Classified
- NAICS CODE: 332710 Machine Shops
- Suggested Workers Compensation Code(s): 3632 Machine Shop NOC
3599: Industrial and Commercial Machinery and Equipment, Not Elsewhere Classified
Division D: Manufacturing | Major Group 35: Industrial And Commercial Machinery And Computer Equipment | Industry Group 359: Miscellaneous Industrial And Commercial
3599 Industrial and Commercial Machinery and Equipment, Not Elsewhere Classified: Establishments primarily engaged in manufacturing machinery and equipment and parts, not elsewhere classified, such as amusement park equipment and flexible metal hose and tubing. This industry also includes establishments primarily engaged in producing or repairing machinery and equipment parts, not elsewhere classified, on a job or order basis for others. Establishments primarily engaged in manufacturing motor vehicle engine filters are classified in Industry 3714, and those manufacturing coin-operated amusement machines are classified in Industry 3999.
- Amusement rides for carnivals
- Bellows, industrial: metal
- Boiler tube cleaners
- Carousels (merry-go-rounds)
- Chemical milling job shops
- Cleaners, boiler tube
- Crankshaft and camshaft machining
- Cups, oil and grease: metal
- Electrical discharge machining (EDM)
- Fan forges
- Ferris wheels
- Filters, internal combustion engine: oil, gasoline, air intake, except
- Grinding castings for the trade
- Hose, flexible metallic
- Leak detectors, water
- Machine shops, jobbing and repair
- Propellers, ship and boat: machined
- Riddles, sand (hand sifting or screening apparatus)
- Sludge tables
- Swage blocks
- Ties, form: metal
- Tubing, flexible metallic
- Weather vanes
Machine Shop Insurance - The Bottom Line
For the safety of yourself, your employees, and your livelihood, having the right machine shop insurance coverage is essential. To find out what types of options are available to you, how much coverage you should invest in, and how much your coverage will cost, speak to a reputable insurance broker.
Additional Resources For Manufacturing Insurance
Learn all about manufacturing insurance. Manufacturers face many unique risks such as product libility and/or product recall exposures due to the nature of their business operations.
- 3D Printing
- Audio & Video Equipment
- Auto Parts
- Bottling Plants
- Brooms & Brushes
- Camping Equipment
- Canned Fruit & Vegetables
- Canvas Products
- CBD Oil And Hemp
- Clock & Watch
- Commercial Air Conditioning
- Commercial Electronics
- Communications Equipment
- Construction Equipment
- Cork Products
- Dairies & Creameries
- Down And Feather Products
- Dry Ice
- Dyes & Pigments
- Electronic Toys & Games
- Exercise Equipment
- Farm Equipment
- Feed & Grain
- Flavoring Extracts
- Frozen Foods
- Fruit Juice
- Fur Garment
- Garage Door
- Gypsum Products
- Ice Cream
- Industrial Equipment
- Iron & Steel Foundries
- Lawn Mowers
- Leather Apparel
- Leather Goods
- Lighting & Wiring
- Lumber & Wood Products
- Machine Shop
- Major Electrical Appliances
- Marijuana Products
- Mattresses & Box Springs
- Metal & Plastic Furniture
- Metal Heat Treating
- Metal Toys
- Musical Instruments
- Nonferrous Foundries
- Ornamental Metalwork
- Paper & Allied Products
- Pet Food
- Plastic & Rubber Toys
- Plastic Goods
- Plastics Molding, Forming & Extruding
- Product Liability
- Psychedelic Drugs
- Pulp & Paper Mills
- Residential Air Conditioning & Heating
- Rubber Goods
- Sawmills & Planing Mills
- Screw Machine Products
- Sheet Metal
- Soap & Detergent
- Small Electrical Appliances
- Sporting Goods
- Stone Products
- Textiles Finishing & Coating
- Tool & Die Shops
- Vegetable Juice
- Vending Machines
- Wire Rope
- Wood Furniture
- Writing Instruments
- Specialty Manufacturing
- Specialty Product Liability
The manufacturing industry is a vital part of the economy and plays a significant role in the production of goods and services. However, it is also an industry that is prone to risks and accidents, which can result in costly damages and lawsuits. Therefore, it is essential for businesses in the manufacturing industry to have insurance to protect them against potential losses.
Business insurance can cover a wide range of risks, including property damage, liability, and worker injuries. For instance, if a fire were to break out in a manufacturing facility and destroy equipment or inventory, commercial insurance could cover the costs of replacing or repairing the damages. Similarly, if a worker were to be injured on the job, business insurance could cover medical expenses and lost wages.
In addition to protecting against physical damages, insurance can also provide financial protection against legal liabilities. If a customer were to sue a manufacturing business for a faulty product, the commercial insurance could cover the costs of legal fees and settlements.
Overall, insurance is essential for the manufacturing industry as it helps to mitigate risks and protect against unexpected costs. Without it, businesses in the industry could face financial ruin in the event of an accident or lawsuit.
Minimum recommended small business insurance coverage: Building, Business Personal Property, Business Income with Extra Expense, Equipment Breakdown, Employee Dishonesty, Accounts Receivable, Computers, Goods in Transit, Valuable Papers and Records, General Liability, Employee Benefits Liability, Environmental Impairment Liability, Umbrella Liability, Hired and Non-owned Auto Liability & Workers Compensation.
Other commercial insurance policies to consider: Earthquake, Flood, Cyber Liability, Employment-related Practices Liability, Business Auto Liability and Physical Damage and Stop Gap Liability.