Engineers Business Insurance: A Complete Guide
Engineers Business Insurance: A Complete Guide
Running an engineering business can involve a lot more risk than you might initially think.
You may have expensive machinery and equipment, employees working with tools and machinery, engineers working at customers’ premises and products or components being supplied to other businesses. You may also be responsible for designs, technical advice or the installation of equipment.
What happens if a machine you rely on breaks down? What if an employee is injured at work? What if something you have designed or supplied causes damage to a customer’s property? Or perhaps something happens at your premises and you are unable to trade for several months.
These are the sorts of things we think about when arranging insurance for an engineering business.
There isn’t a single insurance policy that is right for every engineering company. A small engineering workshop will have very different requirements from an engineering consultancy or a business designing and installing specialist equipment.
This is why we believe engineers insurance should start with understanding what your business actually does, rather than simply choosing a policy from a list of standard covers.
What is engineers business insurance?
Engineers business insurance is designed to protect an engineering company against the different risks it faces as part of its day-to-day activities.
For many engineering businesses, a Business Combined policy can bring a number of different areas of insurance together. This might include cover for the premises, machinery, equipment, stock, business interruption and liability.
Depending on the work you undertake, there may also be a need to consider Professional Indemnity, machinery breakdown, goods in transit, tools and equipment away from the premises, cyber insurance or other specialist covers.
The important point is that these covers shouldn’t simply be added because they appear on a checklist.
They need to be relevant to your business.
An engineering company that mainly provides technical consultancy will have a very different risk profile from a business that manufactures components or sends engineers out to customer sites to install and maintain equipment.
Why do engineering businesses need specialist insurance?
Engineering is a broad term, and that’s one of the reasons insurance for engineering businesses can be complicated.
Some businesses are involved in precision engineering and machining. Others manufacture or repair equipment, undertake fabrication, provide electrical or mechanical engineering services, carry out installations or provide specialist advice and design work.
The risks can change significantly depending on what you do.
If you have a workshop, you may have significant amounts of machinery, tools, raw materials and stock on site. If you work at customer premises, you may be taking your own equipment with you and potentially working around other people’s property and employees.
If you design equipment or provide engineering advice, there may be a professional responsibility attached to the work you undertake.
And if you manufacture or supply a component that becomes part of someone else’s product, you could potentially face a claim long after the component has left your premises.
This is why we wouldn’t recommend looking at engineering insurance as simply “buildings, contents and liability”.
You need to look at how the business works as a whole.
Protecting your engineering premises and equipment
For many engineering businesses, the machinery is at the heart of the operation.
CNC machines, lathes, milling machines, presses, welding equipment, compressors and other specialist equipment can represent a very significant investment.
It is therefore important to consider not only what the machinery is worth, but what would happen to the business if you suddenly couldn’t use it.
A machine might be damaged by an insured event such as a fire, but machinery can also suffer a mechanical or electrical breakdown.
If it is a machine that you can replace quickly, the disruption may be manageable. But if it is specialist equipment with a long lead time or requires parts or engineers from overseas, the situation can be very different.
The cost of the repair may actually be the smaller part of the problem.
The bigger issue could be the income you lose while you are waiting for the machine to be repaired or replaced.
That is why we think it is important to look at machinery and business interruption together rather than considering them as completely separate issues.
What happens if your engineering business has to stop trading?
This is something many businesses don’t think about until they are faced with it.
Imagine a serious fire at your premises. The building can be repaired and the machinery can eventually be replaced, but you still have wages to pay, finance commitments, customers waiting for orders and bills arriving.
You may also need to find alternative premises or outsource some of your work while repairs are being carried out.
Business interruption insurance is designed to help with the financial impact of an insured interruption to your business.
For an engineering company, getting the level of cover right can be particularly important because replacing specialist machinery and getting production back to normal may take considerably longer than you initially expect.
The indemnity period should be considered on a case-by-case basis, taking into account how long it would realistically take the business to recover following a major loss. As a general guide, we would recommend considering a minimum indemnity period of 24 months, particularly where the business relies on specialist machinery, has long lead times for replacement equipment or would take time to rebuild its customer base following a significant interruption.
It’s not simply about looking at how long you think it might take to repair the premises. You need to think about how long it could realistically take the whole business to get back to where it was before the loss.
Public Liability and Employers’ Liability
Liability insurance is an important part of most engineering businesses’ insurance arrangements.
If you employ people, Employers’ Liability insurance is generally a legal requirement in Great Britain. It provides protection if an employee becomes injured or ill as a result of their work.
For an engineering business, there can be a number of different workplace risks. Employees may be using machinery, working with tools, handling heavy materials or carrying out work in potentially hazardous environments.
Then there is Public Liability.
This can be particularly important for engineering companies because your work isn’t necessarily confined to your own premises.
You may have customers, suppliers and contractors visiting your workshop, or your employees may be working at customer sites.
If your work accidentally causes injury to another person or damage to someone else’s property, you could face a claim.
The level of cover you need will depend on your business and, importantly, on any contractual requirements imposed by your customers.
Products Liability can be particularly important for engineers
If your business manufactures, repairs, modifies or supplies products or components, Products Liability is another area that needs careful consideration.
The fact that something has left your premises doesn’t necessarily mean your responsibility ends there.
For example, you could manufacture a component that is subsequently incorporated into another company’s machinery. If that component fails and causes damage or injury, your business could potentially face a claim.
The risks can become even more significant if products are supplied outside the UK.
It is therefore important that your insurer understands exactly what you manufacture or supply, who you supply it to and where your products ultimately end up.
Products Liability is not simply about whether you make a “product”. It’s about understanding the role your business plays within the wider supply chain.
What if your engineering business also provides design or technical advice?
This is an area that can sometimes get overlooked.
An engineering business may not just manufacture or repair things. You might also design equipment, produce technical drawings, carry out calculations, provide consultancy or advise customers on the best solution for a particular project.
If a customer relies on your professional advice or design and subsequently suffers a financial loss because something is wrong, the situation can be very different from a straightforward Public Liability claim.
This is where Professional Indemnity insurance may need to be considered.
Again, it comes back to understanding what the business actually does.
Two companies may both describe themselves as engineering companies, but their insurance requirements could be completely different.
Working at customer premises
Many engineering businesses spend a significant amount of time away from their own premises.
You might be installing machinery, carrying out maintenance, undertaking repairs or providing specialist engineering services at a customer’s site.
This introduces another layer of risk.
You could be working on someone else’s machinery or property, using your own tools and equipment and potentially working alongside other contractors.
It is therefore worth checking that your insurance covers the work you are actually undertaking and that your policy doesn’t contain restrictions that could cause problems when working away from your own premises.
It is also common for larger customers to specify the level of insurance they expect their contractors and suppliers to have.
Before agreeing to a contract, it is worth checking those requirements rather than discovering afterwards that your existing policy doesn’t meet them.
What about your tools and equipment?
If your engineers regularly travel to customer sites, you may have a considerable amount of equipment being taken away from your premises.
Tools, testing equipment, laptops and specialist equipment can all be expensive to replace.
It is important to understand whether your policy covers these items when they are away from the premises; including while they are being transported or left in vehicles, if relevant.
This is another example of why simply looking at the contents sum insured doesn’t necessarily tell you whether your equipment is properly protected.
Cyber insurance for engineering businesses
Engineering businesses are becoming increasingly reliant on technology.
From accounting and customer records to computer-aided design, production systems and connected machinery, an IT problem can have a much bigger impact than simply being unable to send an email.
A cyber attack could potentially prevent access to important systems or data and cause significant disruption to the business.
Cyber insurance isn’t automatically included within every Business Combined policy, and it shouldn’t be assumed that your existing commercial insurance provides comprehensive protection against a cyber incident.
For businesses that rely heavily on technology, it is worth considering the risks separately.
Getting your sums insured right
One of the most important parts of arranging business insurance is making sure the figures are accurate.
It sounds obvious, but businesses change.
You may have bought new machinery, increased your stock levels, taken on more employees or significantly increased your turnover since the last time your insurance was arranged.
The value of your machinery may have changed, too. Replacing a five-year-old machine may cost considerably more than its original purchase price; particularly if availability has changed or a newer equivalent is now required.
The same applies to your premises.
Buildings should generally be insured for the cost of rebuilding rather than their market value and specialist features can sometimes make the calculation more complicated.
Business interruption also needs careful consideration because the figure isn’t simply based on what you earned last year.
It needs to reflect the financial impact of a serious interruption and how long it could realistically take your business to recover.
Don’t assume that the cheapest quote gives you the best cover
We understand that insurance is a cost and that nobody wants to pay more than they need to.
But when comparing engineering insurance, we think it is important to look beyond the premium.
Two quotations might appear very similar but have significant differences once you look at the policy wording.
There could be differences in the limits, excesses, exclusions, conditions or the way particular risks are covered.
A cheaper policy isn’t necessarily poor insurance, just as a more expensive policy isn’t automatically better.
The important thing is understanding what you are actually getting for the premium.
For an engineering business, a relatively small saving on the annual premium may not be worth it if it means an important area of your business isn’t properly protected.
Why use an independent insurance broker?
This is where we believe having an independent broker can make a real difference.
At Greenfield Insurance Brokers, we don’t just want to know what your turnover is and how much your machinery is worth.
We want to understand what you actually do.
We want to know what sort of engineering work you undertake, whether you manufacture anything, whether you work at customer premises, whether you provide design or technical advice and what would happen if you were unable to operate for a period of time.
Once we understand the business, we can look at the insurance options available and explain the differences.
We don’t believe insurance should be about simply comparing premiums.
The wording matters. The exclusions matter. The limits matter. And perhaps most importantly, the insurance needs to make sense for the business it is protecting.
We’ve been helping businesses with their insurance for more than 35 years, and we believe our role doesn’t stop once the policy has been arranged.
If something goes wrong, that’s when you really find out how good your insurance and your broker are.
Reviewing your engineering insurance
Your insurance should change as your business changes.
If you’ve bought new machinery, taken on additional employees, started working at new customer sites, introduced new services, begun exporting or taken on larger contracts, it’s worth reviewing your insurance to make sure it still reflects what you are doing.
Even if nothing has changed, an annual review can be a useful opportunity to make sure you understand your existing cover and that the sums insured remain appropriate.
At Greenfield Insurance Brokers, we help engineering businesses across the UK review their insurance and find cover that is appropriate for the risks they face.
If you’d like to talk to us about your engineers business insurance, get in touch.
We’ll take the time to understand your business, explain the options available and help you look beyond the price to the cover itself.
Greenfield Insurance Brokers – independent insurance advice for businesses across the UK.
Frequently Asked Questions
- What insurance does an engineering company need?
There isn't one standard insurance package that is right for every engineering company. The cover you need will depend on what your business does, where you work and the risks involved. Depending on the business, this could include Business Combined Insurance, Employers' Liability, Public Liability, Products Liability, Professional Indemnity, machinery breakdown, business interruption and cover for tools and equipment. - Is Business Combined Insurance suitable for engineering companies?
Business Combined Insurance can be suitable for many engineering businesses because it allows different areas of cover to be brought together under one policy. The important thing is making sure the policy is tailored to the particular activities and risks of the business, rather than assuming that every Business Combined policy provides the same protection. - Does engineering insurance cover machinery?
It can, but the level of cover depends on the policy. Engineering businesses should consider both physical damage to machinery and what could happen if important equipment suffers a mechanical or electrical breakdown. Where machinery is critical to the operation of the business, machinery breakdown and associated business interruption should be considered carefully. - Do engineering companies need Public Liability insurance?
Public Liability insurance can be important for engineering businesses, particularly where engineers work at customer premises, customers or contractors visit the business or the company's activities could cause injury or damage to third-party property. The appropriate level of cover will depend on the business and any contractual requirements. - Do engineering companies need Professional Indemnity insurance?
Some engineering companies may need Professional Indemnity insurance, particularly where they provide design, consultancy, technical advice, calculations or other professional services. Public Liability and Professional Indemnity cover different types of risk, so it is important to consider what your business is actually responsible for. - Do engineering companies need Products Liability insurance?
If an engineering business manufactures, repairs, modifies or supplies products or components, Products Liability may be an important part of its insurance arrangements. The appropriate cover will depend on what is supplied, who the customers are and where the products are ultimately used. - Is Employers' Liability insurance compulsory for engineering companies?
If you employ people, Employers' Liability insurance is generally a legal requirement in Great Britain, subject to certain exemptions. The minimum statutory level of cover is £5 million, although some businesses may choose or be required to arrange a higher limit. - Does engineers business insurance cover work carried out at customer premises?
This depends on the policy and the activities that have been declared to the insurer. If engineers regularly work away from their own premises, this should be discussed when arranging the insurance so that the policy reflects the work actually being undertaken. - How much does engineers business insurance cost?
There isn't a standard price for engineering insurance. The premium can be affected by the size and type of business, turnover, payroll, machinery and equipment, premises, claims history, products, activities, liability exposures and the level of cover required. Comparing the premium alone can therefore be misleading because policies can provide different levels of protection. - Why use an insurance broker for engineers business insurance?
An independent insurance broker can help you understand the risks faced by your particular business and compare suitable insurance options. At Greenfield Insurance Brokers, we look beyond the premium to consider the cover, limits, exclusions and conditions so that you can make an informed decision about protecting your business.
