Index
A 12-person CNC shop doing $3.5 million in sales typically pays $38,000 to $72,000 a year for a full insurance program, with workers’ compensation about half of it. A five-person shop under $1 million runs $9,000 to $22,000. A 28-person shop above $8 million runs $95,000 to $210,000. Aerospace and medical device work adds 40% to 100% on the products and errors and omissions lines.
One coverage drives more disputes than any of them, and almost no shop carries it. When your part is out of tolerance, injures nobody, damages nothing, but shuts down your customer’s line, general liability pays nothing. That gap is where this page starts.
Three exposures a machine shop has that a general manufacturer does not
Your defective part becomes someone else’s product failure. Your bracket ends up inside a $600 appliance or a $60,000 vehicle. The exposure is the value of the assembly, not of your part, and a part 0.003 inches out of spec hurts nobody while stopping a line. That is economic loss, and the general liability form is built to exclude it.
Customer property sits in your building. Fixtures, tooling, castings, raw stock, finished goods awaiting pickup. You are a bailee for all of it. Your property policy insures your property.
Equipment values concentrate. Three machines can carry more insured value than the building. A three-axis vertical machining centre runs $100,000 to $500,000, a five-axis machine exceeds $500,000, a mid-range hydraulic CNC press brake runs $25,000 to $80,000 before tooling, and an industrial fiber laser reaches $500,000 alone.
What coverage a machine shop needs, and what each line does
| Coverage | What it does for a shop |
|---|---|
| General liability with products | Third-party injury and property damage, including from your parts |
| Product liability | Injury or damage caused by a part after it ships |
| Manufacturers E&O | Economic loss from an out-of-tolerance part that injures nobody |
| Commercial property | Building, contents, stock and tooling, at replacement cost not book value |
| Equipment breakdown | Mechanical and electrical failure of CNC equipment, compressors, transformers |
| Bailee / customer property | Customer material and tooling in your care |
| Inland marine on tooling | Tooling, fixtures and portable equipment, on premises, off premises and in transit |
| Business income and extra expense | Lost income while a machine or the building is down, plus the cost of outsourcing |
| Workers’ compensation | The largest line in the program, see NCCI 3632 below |
| Commercial auto | Delivery vehicles and employee driving, $1M combined single limit |
Two are never on the policy unless someone asked: bailee coverage and manufacturers E&O. Shops also under-buy the products line, sizing it to their own sales rather than their customer’s. Product liability insurance for manufacturers explains why the products-completed operations aggregate is a separate bucket from the general aggregate.
The CP 10 30 Special Form will not pay when a machine breaks itself
The ISO Causes of Loss – Special Form, CP 10 30, excludes “mechanical breakdown, including rupture or bursting caused by centrifugal force.” A crashed spindle, a failed servo drive, an arcing transformer, a compressor that lets go. None of it is a covered cause of loss, even though the machine is scheduled at replacement cost. Equipment breakdown coverage, standalone or endorsed onto the property policy, is what responds, and it carries the resulting business income and extra expense with it.
CGL exclusion (m), impaired property, and manufacturers errors and omissions
This is the section worth reading twice.
Your commercial general liability policy responds to bodily injury and property damage. It says so in Coverage A. It does not respond to a customer’s pure financial loss when your part simply fails to perform.
Exclusion (m) of the standard CG 00 01 form removes property damage to “impaired property or property not physically injured” arising out of a defect, deficiency, inadequacy or dangerous condition in your product, or from a failure to perform a contract according to its terms. Nothing broken means nothing covered.
What that looks like in practice. You machine 4,000 housings. A dimensional error puts them all out of tolerance. Your customer discovers it at incoming inspection, halts the build, and sends you a claim for the sorting cost, the line downtime, the expedited freight on replacements and the late-delivery penalty their own customer charged them. Total: $310,000. Nobody was hurt. Nothing was damaged. Your general liability carrier declines under exclusion (m), correctly.
Manufacturers errors and omissions (also sold as product performance or product warranty coverage) is written for exactly this claim. It covers financial loss, damages and defence costs arising from a product’s failure to perform as intended or warranted, including design errors, specification mistakes and installation errors, with no bodily injury or property damage required.
form. It is a manuscript product written mainly in the excess and surplus lines market, so terms vary sharply between carriers. That is a reason to have a broker read the wording, not a reason to skip the coverage.
Typical limits machine shops carry, and what customers require
Limits here are set by the purchase order, not by the shop’s own risk appetite
| End market | Typical primary CGL with products | Typical total limit required | What the contract usually adds |
|---|---|---|---|
| General job shop and industrial | $1M occurrence / $2M products-completed operations aggregate | $2M – $5M with umbrella | Additional insured, waiver of subrogation |
| Automotive Tier 1 and Tier 2 | $1M / $2M primary | $5M – $10M | Named additional insured, waiver of subrogation, long-tail warranty obligations |
| Medical device | $1M / $2M primary | $5M – $10M | Audit rights, sometimes a clinical trial extension |
| Aerospace | $1M / $2M primary | $10M | Grounding liability specifically named |
The total is almost always a $1 million primary with an umbrella stacked over it. A $10 million primary is not how this market prices. For a parts maker the products-completed operations aggregate is the limit that matters, so confirm it exists on the declarations page. Manufacturers E&O sits outside the tower: $1 million with a $25,000 retention is the common structure under $10 million in sales.
Contract requirements from aerospace, automotive and medical device customers
These end-markets flow requirements down to suppliers, and the insurance schedule is part of the purchase order.
Aerospace. AS9100, layered on ISO 9001 with aerospace requirements for configuration management, counterfeit parts prevention, first article inspection, risk management and product safety. NADCAP accreditation for special processes: heat treat, non-destructive testing, welding, plating.
Automotive. IATF 16949, PPAP submissions, and long-tail warranty and recall obligations, with the customer named as additional insured.
Medical device. ISO 13485, device history record traceability, design controls under ISO 14971 risk management, and often direct customer or FDA audit rights.
Three terms appear in nearly all of them: additional insured status, primary and non-contributory wording (CG 20 01), and a waiver of subrogation (CG 24 04). A certificate stating you have them is not the same as an endorsement granting them. Check the policy, not the ACORD.
How much machine shop insurance costs
| Employees | Typical sales | Total annual program | Per employee |
|---|---|---|---|
| 1 – 5 | Under $1M | $9,000 – $22,000 | $2,200 – $4,400 |
| 6 – 15 | $1M – $4M | $24,000 – $78,000 | $3,900 – $5,200 |
| 16 – 50 | $4M – $12M | $70,000 – $190,000 | $3,800 – $4,400 |
| 50+ | $12M+ | $180,000 – $450,000 | $3,400 – $4,000 |
Cost per employee falls as the shop grows, then flattens. Below six people, minimum premiums dominate. Above fifty, scale stops helping because payroll grows with headcount. For these figures against food, plastics and other segments, see how much manufacturing insurance costs.
Carrier appetite and what underwriters rate a machine shop on
Standard middle-market carriers write general job-shop CNC without hesitation. Appetite narrows at the edges: flight-critical aerospace parts, implantable device components, firearms and ammunition components, and any work carrying design responsibility move to a specialist manufacturing unit or into the excess and surplus lines market. Manufacturers E&O is an E&S product almost everywhere. The same shop can price 20% to 40% apart between a specialist and a generalist carrier, which is why the submission matters as much as the risk.
End-market. The loading nobody expects. Aerospace and medical device customers do not just demand higher limits. They change your hazard class, and the products and E&O rates move with it.
Equipment schedule quality. Underwriters want make, model, year and replacement cost, not a lump sum. A vague schedule prices conservatively.
Scrap and chip handling. Oily chips, coolant and swarf storage are a fire load. Housekeeping shows up on the survey.
Welding, heat treat and finishing. Hot work adds a property loading and a comp loading at once. A documented hot work permit system offsets both.
Construction and protection class. Construction type, sprinklers, distance to hydrant and fire station, roof and electrical age, often already true, but never documented on the application.
Line by line: what each coverage is rated on
| Line | Rating basis | Typical share of program |
|---|---|---|
| Workers’ compensation | Payroll per $100, NCCI 3632 | 40% – 55% |
| General liability with products | Gross sales per $1,000 | 10% – 16% |
| Commercial property | Total insured value per $100 | 12% – 20% |
| Equipment breakdown | Object schedule | 3% – 6% |
| Inland marine: tooling | Scheduled value | 2% – 5% |
| Bailee: customer property | Stated limit | 1% – 3% |
| Business income and extra expense | Gross earnings | 5% – 10% |
| Commercial auto | Per vehicle and driver | 5% – 12% |
| Umbrella | % of underlying | 6% – 10% |
| Manufacturers E&O | Sales and limit | 8% – 15% (when purchased) |
| Cyber | Revenue and controls | 2% – 4% |
Umbrella at $4M to $9M over primary is standard, and commercial auto is often the second-largest line in a small shop.
NCCI class code 3632: machine shop workers’ comp, payroll splits and overtime
Between 40% and 55% of the program, and the line with the most recoverable money in it. Three things determine it.
The class code. NCCI 3632, Machine Shop NOC. It permits incidental “nosing in,” excludes work on vehicles, and excludes cartridge and shell case manufacturing. Metal stamping falls under NCCI 3400, Metal Stamped Goods Manufacturing NOC, and sheet metal and welding may classify separately depending on work mix and state. Eleven states use their own rating bureaus rather than NCCI: California, Delaware, Indiana, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania and Wisconsin, so codes and rates both differ there.
The payroll figure. Audited annually. Office staff, estimators, outside sales and delivery drivers do not belong in 3632, and shops that never split their payroll pay shop rates on desk work until somebody checks. Report overtime correctly too: in most states only the straight-time portion is rateable, and shops reporting gross overtime overpay.
The experience modification rate. A straight multiplier. A 1.20 mod on a $58,000 comp line costs $11,600 a year more than a 1.00, and it costs you work, because aerospace and automotive customers screen suppliers on the number. Experience modification rate for manufacturers covers the calculation and how to bring it down.
Behind all three sit the injuries: amputations, lacerations, crush and eye injuries, hearing loss, repetitive strain. More than 26,000 workplace amputations were recorded in the US between 2015 and 2024 (roughly seven a day), and manufacturing accounts for about half. OSHA has run a National Emphasis Program on amputations in manufacturing since 2019. In FY2025 machine guarding (1910.212) was the tenth most-cited standard and lockout/tagout (1910.147) was fourth.
Eight ways machine shops lower premium
Split your payroll by class code. The fastest win available, frequently worth 10% to 20% of the comp line.
Report overtime correctly. Only straight-time is rateable in most states. Shops reporting gross overtime overpay until an audit catches it, and audits correct in the carrier’s favour more often than yours.
Document machine guarding. A written audit against 1910.212, with photographs and a corrective action log. Underwriters know the amputation data. Show them you do too.
Document lockout/tagout. A written 1910.147 program with machine-specific procedures and annual employee verification.
Build a return-to-work program. The most reliable way to control the primary loss portion of your mod: it converts lost-time claims into medical-only claims, and medical-only claims are discounted to 30% of value in the NCCI formula.
Restructure deductibles. No property claim under $25,000 in a decade means you are paying a carrier to insure losses you already absorb.
Schedule your tooling accurately. Underscheduled tooling is an uninsured loss waiting; overscheduled tooling is a straight overpayment. Most shops are wrong in one direction and have not checked in years.
Verify your unit statistical report. The loss data behind your mod comes from the carrier and contains errors more often than anyone assumes: open reserves that should be closed, claims coded to the wrong period, subrogation not credited. Challenging them costs nothing but time.
Frequently asked questions
What NCCI class code applies to a machine shop, and what does it exclude?
NCCI 3632, Machine Shop NOC. It permits incidental “nosing in” but excludes work on vehicles and excludes cartridge and shell case manufacturing. Metal stamping classifies separately under NCCI 3400. Sheet metal and welding may also split out depending on work mix and state.
What are typical liability limits for a machine shop?
General job-shop work runs $1 million per occurrence with a $2 million products-completed operations aggregate, plus umbrella to $2–$5 million. Automotive and medical device customers typically require $5 million to $10 million. Aerospace commonly requires $10 million with grounding liability named.
Does my general liability cover a part that is out of tolerance?
No, not if the part injures nobody and damages nothing else. Exclusion (m) of CG 00 01 removes claims for impaired property and property not physically injured. Sorting, downtime, expedited freight and late penalties are pure economic loss. That is what manufacturers E&O is for.
Is customer property in my shop covered?
Not under a standard property policy, which covers property you own. Customer material, tooling and fixtures need bailee coverage or a customer property endorsement with a stated limit. Shops holding six-figure customer tooling often carry a $75,000 limit because nobody re-read it.
Does my property policy pay when a CNC machine fails mechanically?
No. The ISO CP 10 30 Special Form excludes “mechanical breakdown, including rupture or bursting caused by centrifugal force.” Spindle crashes, servo drive failures, compressor and transformer losses need equipment breakdown coverage, standalone or endorsed onto the property policy.
What is inland marine coverage for a machine shop?
It covers tooling, fixtures, portable equipment and property in transit: items that move, or that a standard property form limits. It is scheduled, so accuracy matters in both directions. Most shops carry more tooling value than they have scheduled.
Which carriers have appetite for aerospace and medical device machine shops?
Standard middle-market carriers write general job-shop CNC readily. Flight-critical aerospace parts, implantable device components and work carrying design responsibility usually move to a specialist manufacturing unit or the excess and surplus lines market. Manufacturers E&O is an E&S product almost everywhere.
How is overtime reported in a workers’ comp audit?
In most states only the straight-time portion of overtime pay is rateable. The premium portion comes out if your payroll records separate it. Shops reporting gross overtime overpay on their largest line every year. Keep records the auditor can read.
How much does insurance cost for a machine shop?
A 12-person CNC shop at $3.5 million in sales runs $38,000 to $72,000 a year all-in, workers’ compensation about half. Shops under five employees land between $9,000 and $22,000. A 28-person shop above $8 million runs $95,000 to $210,000.
Do I need product liability insurance if I only make parts to a customer’s print?
Yes. Building to print may give you a defence on design defect, but none on manufacturing defect, and that is exactly what a machine shop is exposed to. Your customer will require the coverage contractually anyway.
What insurance does a metal fabrication shop need?
The same program, with more weight on property and equipment breakdown if you run presses, lasers or plasma tables, and on welding exposures in workers’ compensation. Fabrication and machining share a market and usually a policy.
How do I lower my machine shop’s workers’ comp premium?
Audit the class code split first. Then report overtime correctly, document machine guarding and lockout/tagout, build a return-to-work program, and verify your unit statistical report. Manage frequency, not severity. The mod formula weights small frequent claims most heavily.
Get machine shop insurance from Alliance Risk
A machine shop’s program has two big lines and one big hole. The lines are workers’ compensation and the equipment on your floor. The hole is what happens when a part goes out of tolerance, injures nobody, damages nothing, and stops your customer’s line, because exclusion (m) removes that claim from your general liability policy entirely, and most shops don’t carry the coverage that picks it up.
Coverage is half the job. The other half is what underwriters credit: guarding audits you can produce, a lockout/tagout program with machine-specific procedures, a return-to-work policy, and payroll split properly between shop and office. Machine guarding and lockout/tagout were the tenth and fourth most-cited OSHA standards in FY2025. Underwriters know that data. Insurance pays the claim. Documentation sets your rate.
We place machine shop and fabrication risks with carriers who understand precision work, and we look at what usually gets missed: customer property sitting in your building, tooling nobody has rescheduled in years, and whether your aerospace work is being priced as aerospace work.
Send us your loss runs, your equipment schedule and your largest customer’s insurance requirements. We’ll tell you which lines are priced above market, whether your payroll is split correctly, and what your policy does when a part is out of spec.
Talk to us about your shop’s program →
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