Machine Shop Insurance (2025)

Machine shop insurance protects your business in the event of workplace accidents, property damage, or liability claims. For example, if a customer or contractor is injured by equipment on your shop floor, your insurance can help cover medical costs and legal expenses. This type of business insurance helps you keep your operations running smoothly by covering incidents like employee injuries, equipment breakdowns, and professional errors.

Why Do Machine Shops Need Insurance?

Machine shop owners need insurance because accidents can happen at any time. Without the right coverage, even a small mistake can cost a lot of money. Imagine a customer visits your shop and gets hurt by a piece of equipment. Or one of your machines damages a client’s product. Without insurance, you might have to pay for the injury or damage yourself, and that could be thousands of dollars.

There are also other risks, like a fire in the shop, a tool breaking and hurting an employee, or a customer claiming poor workmanship. Business insurance works like a safety net, it helps pay for things like medical bills, repairs, or legal costs if someone sues you.

Whether you’re a one-person operation or run a full team, the right insurance helps you work with peace of mind, knowing your shop is protected if something goes wrong.

What Insurance Do Machine Shops Need?

Operating a machine shop involves distinct hazards that many other businesses do not face. Your daily operations rely on heavy machinery, sharp cutting tools, and raw materials that can cause property damage or severe injuries.

To keep your business, staff, and assets safe, you should review the following insurance policies.

Business Owner’s Policy (BOP)

Many shop owners choose a Business Owner’s Policy because it is cost-effective. A BOP bundles general liability and commercial property insurance into a single package. It usually costs less than purchasing these coverages separately. This policy protects your building, tools, and inventory while also providing liability coverage.

Example: A severe storm causes a power surge that ruins the internal components of your CNC machines. Your shop cannot produce parts for several days. A BOP helps cover the cost of equipment repairs and can reimburse the income you lost during the downtime.

Commercial Auto Insurance

Personal car insurance policies rarely cover accidents that happen while driving for business tasks. If you or your staff drive to pick up materials or deliver products, you need commercial auto insurance. This coverage pays for medical injuries and property damage if a company vehicle is involved in a crash.

Example: An employee is driving the company van to deliver finished components to a customer. They accidentally rear-end a sedan at a red light. The other driver is hurt, and their car is totaled. Commercial auto insurance pays for the other driver’s medical bills, vehicle repairs, and legal costs if they file a claim.

Machine shops typically pay around $131 per month, or $1,572 per year, for this coverage.

Workers’ Compensation Insurance

If you have employees, you likely need this coverage by law. Workers’ compensation protects your staff if they suffer a work-related injury or illness. It pays for medical care and rehabilitation costs. It also replaces a portion of lost wages while the employee recovers.

Example: A machinist slips on a patch of oil on the shop floor and suffers a broken wrist. Workers’ compensation pays for their emergency room visit and follow-up doctor appointments. It also provides income support while they are unable to run their machine.

Umbrella Insurance

Standard liability policies have financial limits. If a massive claim exceeds those limits, your business assets could be at risk. Umbrella insurance provides an extra layer of protection that sits on top of your general liability and auto policies. It kicks in once the primary policy limit is exhausted.

Example: A client claims a defective part from your shop caused a major malfunction that injured them. They sue your business for $1 million. If your general liability policy has a limit of $500,000, you are responsible for the rest. Umbrella insurance covers the remaining $500,000, so you do not have to pay it out of pocket.

General Liability Insurance

General liability is the cornerstone of protection for most small businesses. It guards against claims involving third-party bodily injury, property damage, or advertising injury. If your business operations accidentally hurt a bystander or damage client property, this insurance handles the legal fees and settlement costs.

Example: A machinist is installing a part at a client’s facility and accidentally drops a heavy tool on the client’s custom testing rig. The rig is destroyed. General liability insurance covers the cost to replace the client’s equipment and pays for legal defense if the client sues you.

Cheapest Business Insurance For Machine Shops

The cheapest provider for overall business insurance is Acuity, with an average annual cost of $460.

Note: The figures above are estimates of the lowest starting prices for a basic liability policy, often for a sole proprietor or a very small machine shop with minimal public interaction and low-risk operations (e.g., no heavy welding or off-site work).

Cheapest Machine Shop General Liability Insurance

The cheapest provider for General Liability insurance is The Hartford, with an average annual cost of $771.

Note: These figures estimate a standard General Liability policy. The final premium is heavily influenced by the specific types of work you do (custom fabrication vs. simple parts) and your shop’s product liability exposure (e.g., making parts for critical applications like automotive or aerospace).

Cheapest Machine Shop Business Owner’s Policy

The cheapest provider for a Business Owner’s Policy (BOP) is Travelers, with an average annual cost of $952.

Note: These estimates are for a standard BOP, which bundles General Liability with Commercial Property insurance. Your actual premium will vary significantly based on the replacement value of your machinery (e.g., CNC machines, lathes, mills), the size of your workshop, and the building’s age and fire-suppression systems.

How Much Does Machine Shop Insurance Cost?

Machine shop insurance usually costs between $800 and $1,500 per year for basic general liability coverage. Smaller shops with just a few tools and no employees usually pay less. But if your shop is bigger, has more workers, or uses expensive machines, the price can be much higher, sometimes over $2,000 a year.

The cost of business insurance depends on several things, like where your shop is located, how many people you employ, and what kind of work you do. Shops that offer welding, cutting, or custom jobs may pay more because of higher risks. Your insurance history, safety practices, and how valuable your machines are also affect your price. If you move equipment or work at other job sites, that can raise the cost too.

You can also choose to add extra coverage like workers’ comp, equipment protection, or property insurance. Bundling these into one policy might save you money. Even though a cheaper plan may seem like a good idea, it’s important to pick insurance that fully protects your shop from common accidents or problems.

Note: These figures are estimates based on industry averages for a small machine shop. Your actual premium will vary based on several factors, including your shop’s location, size, number of employees, payroll, specific operations, claims history, and the coverage limits you select.

How Is Your Machine Shop Insurance Cost Calculated?

Insurers analyze several unique risk factors to set the price for your machine shop policy. Business size is a primary detail. A small shop with one operator usually pays much less than a large plant with many employees.

Your specific operations also affect the rate. High-risk activities, such as welding, heavy metal cutting, or custom fabrication, often increase premiums. Location is important too. Costs vary by state and can change based on your specific neighborhood or ZIP code.

Providers also check your track record. If you have a history of accidents or claims, they might view your business as a higher risk. They also look at the replacement value of your CNC machines and tools. Other details, such as owning company vehicles and the specific coverage limits you choose, will also play a part in the final cost.