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

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. 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

This policy covers your employees if they get injured or become ill as a result of their job. It helps to provide coverage for 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

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

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

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

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?

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.

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