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?

Running a machine shop comes with more risks than many people realize. You’re working with heavy equipment, sharp tools, and powerful machinery that can cause serious injuries or property damage.

To protect yourself, your employees, and your business, here’s a breakdown of the most important insurance policies every machine shop should consider.

General Liability Insurance

What it is: This is the foundational insurance policy for most small businesses. It protects you from third-party claims of bodily injury, property damage, and personal injury.

What it covers: If you accidentally damage a client’s property or someone gets hurt because of your work, general liability pays for legal fees, repairs, or medical bills.

Example: A machinist at your shop accidentally drops a heavy metal part onto a client’s custom equipment, causing serious damage. The client demands that you pay for the repairs, and threatens legal action. General liability insurance can cover the cost of repairing or replacing the damaged equipment, as well as any legal fees if the client decides to sue.

Workers’ Compensation Insurance

What it is: This policy covers your employees if they get injured or become ill as a result of their job.

What it covers: Medical bills, lost wages, rehabilitation, and even death benefits. It’s also required by law in most states if you have employees.

Example: One of your machinists slips on an oil spill in the shop and breaks their wrist. Workers’ compensation insurance covers their emergency room visit, medical treatment, and pays for lost wages while they recover and are unable to work.

Workers’ comp insurance is required for machine shops with employees in almost every state. It helps protect both your workers and your business when on-the-job injuries happen.

Commercial Auto Insurance

What it is: If you or your employees drive for business purposes, personal auto insurance likely won’t cover accidents. Commercial auto fills that gap.

What it covers: Vehicle damage, injuries, and liability if you’re involved in an accident while driving for work.

Example: One of your employees is delivering finished parts to a customer using a company truck and accidentally rear-ends another vehicle at a stoplight. The other driver is injured, and their car is badly damaged.Commercial auto insurance covers the cost of the other driver’s vehicle repairs, their medical bills, and any legal expenses if they file a claim.

Machine shops pay an average of $131 per month, or $1,572 per year, for commercial auto insurance.

Business Owner’s Policy (BOP)

What it is: A BOP bundles general liability and commercial property insurance into one policy, often at a lower cost than buying them separately.

What it covers: Property damage to your business location or equipment, along with liability protection.

Example: A power surge during a storm damages your CNC machines and causes a shutdown of operations for several days. You lose income while waiting for repairs and replacement parts. A business owner’s policy (BOP) can help cover the cost of repairing or replacing damaged equipment, and also compensate you for the lost income during the downtime.

Umbrella Insurance

What it is: Umbrella coverage provides extra protection beyond the limits of your existing policies, like general liability and commercial auto.

What it covers: Once a claim exceeds the limits of your underlying policy, umbrella insurance kicks in to cover the remaining amount.

Example: A client claims they were seriously injured by a piece of faulty equipment your shop manufactured and sues your business for $1 million. Your general liability insurance covers up to $500,000, but that still leaves your business exposed to the remaining $500,000. Umbrella insurance provides extra coverage beyond your general liability limits.

Machine Shop Insurance Requirements

If you own a machine shop, you may not be required by federal law to have specific insurance. However, depending on your state, local laws, and the type of work you do, certain types of insurance may be required, and others are strongly recommended to protect your business.

Workers’ Compensation Insurance

If you have employees, most states require you to carry workers’ compensation insurance. This helps cover medical bills and lost wages if an employee gets hurt or becomes ill because of work. Even if it’s not required in your area, it’s a smart way to protect both your workers and your business.

Commercial Auto Insurance

If your business owns vehicles used for work, like for picking up materials or delivering products, you’ll likely need commercial auto insurance. This coverage protects your business in case of accidents involving company vehicles.

General Liability Insurance

This coverage is not always legally required, but it’s often needed to sign contracts or lease space. It helps protect your shop from claims of property damage, injuries, or accidents related to your operations. Many clients or property owners will ask for proof of this insurance before working with you.

Business Owner’s Policy (BOP)

A business owner’s policy (BOP) is a popular option for machine shops. It combines general liability insurance and commercial property insurance into one cost-effective package. A BOP can help cover lawsuits, equipment damage, stolen tools, or damage to your shop building. It’s a convenient way to get solid protection without buying separate policies.

How Much Does Machine Shop Insurance Cost?

Machine shop insurance usually costs between $470 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.

How Is Your Machine Shop Insurance Cost Calculated?

Insurance companies figure out how much your machine shop insurance will cost by looking at different risk factors that are specific to your business. One of the biggest things they look at is the size of your shop. A small shop with one person will usually pay less than a larger shop with many employees and machines.

The type of work you do also affects your cost. If your shop handles high-risk jobs like welding, heavy cutting, or custom metal work, your insurance may cost more. Your location matters too, prices can change depending on what state or city you’re in, and even your ZIP code can make a difference.

Insurance companies also look at your claims history. If you’ve had past accidents or made claims, they may see your shop as a higher risk. They’ll also consider the value of your tools and machines, whether you use business vehicles, and the kind of coverage you choose.

Tips To Lower Your Machine Shop Insurance Costs

Insurance costs can add up quickly for a machine shop, but there are practical ways to keep your premiums manageable without skimping on coverage. The key is to understand which factors you can control and take proactive steps to minimize risk.

• Bundle your policies. Combine general liability, property insurance, and other coverages into a Business Owner’s Policy (BOP) to qualify for a multi-policy discount.
• Consider Hired and Non-Owned Auto (HNOA) coverage. If you or your employees use personal vehicles for work, HNOA can be more cost-effective than a full commercial auto policy.
• Keep a clean claims history. Avoiding claims through proper training and safety procedures can lower your risk profile and lead to reduced premiums over time.
• Invest in workplace safety. Implementing safety protocols and training for employees helps reduce the chances of injury claims and can lower workers’ compensation costs.
• Raise your deductible. Opting for a higher deductible can lower your monthly premium, but be sure your business can absorb the extra out-of-pocket cost in case of a claim.
• Review your coverage annually. Adjust your policies as your business evolves to avoid paying for coverage you no longer need.
• Compare quotes from multiple insurers. Rates vary widely, so shopping through Insuranceopedia can help you find the best deal for your current needs.

Taking a strategic approach to your insurance planning can make a real difference in your bottom line. With a little research and regular review, you can stay protected and cost-efficient at the same time.

Following these steps helps ensure you’re properly insured and set up to handle risks confidently and professionally.