Insurance for Machine Shops
A CNC job shop seldom injures anyone directly. The exposure is a part that leaves your dock and fails inside someone else’s machine, or a customer’s billet scrapped on your spindle. We look for machine shop insurance that answers those claims and the purchase-order terms your buyers send, and the insurer decides after reviewing your parts, end markets and loss history.
Machine shop insurance starts with where your parts end up
Underwriters ask what you machine, but the sharper question is what each part goes into. A shelf bracket, a hydraulic manifold and a fitting for an aircraft assembly can come off the same five-axis mill and carry very different liability. Bring a breakdown of sales by end market, such as automotive, medical, aerospace and general industrial, and the share of jobs cut to customer drawings versus parts you design and sell yourself.
California law sharpens that question. In Greenman v. Yuba Power Products (1963), the state Supreme Court held that a maker who puts a defective product on the market answers for the injuries it causes without proof of negligence. O’Neil v. Crane Co. (2012) set the boundary: a manufacturer generally is not liable for harm caused by another company’s product used with its own, unless its own product substantially contributed. For a component shop that cuts both ways. You do not answer for the whole assembly, but when your part is the one that failed, you are in the lawsuit. Our page on insurance for manufacturers covers the wider plant picture.
A bad part and a stopped line: what CNC shop insurance pays
General liability with products-completed operations responds when a part you shipped injures someone or damages other property. That hazard carries its own aggregate limit, apart from the premises aggregate, and it is the number buyers look for on your certificate. Our product liability insurance page explains when a standalone products policy fits better.
Three costs sit outside a standard policy. Remaking your own nonconforming parts is your loss, because the form excludes damage to your own product. Pulling parts back from the field is a recall cost, also excluded. And when an out-of-tolerance part idles a customer’s assembly line without physically damaging anything else, IRMI notes that claims for loss of use of impaired property are excluded from CGL coverage. Manufacturers’ errors and omissions and product recall policies are written for those financial losses, and we ask insurers about them for shops whose parts go into larger assemblies.
Customer-owned castings, billets and fixtures
Many job shops spend more hours cutting metal they do not own than metal they bought. The standard general liability form excludes property damage to personal property in the insured’s care, custody or control, so a customer’s forging ruined by a crash, or a pallet of castings lost in a shop fire, is not a liability claim at all.
The answer sits on the property side: coverage for property of others, often called customers’ goods or bailee coverage, added to commercial property insurance or written on an inland marine form. Tell us the highest value of customer material on your floor at any one time, including fixtures and gauges that customers lend you, and we look for a limit that matches it. Calipers and gauge sets that leave the building belong on a tools and equipment schedule; The Hartford’s example for this trade is a gauge set stolen from a work van.
Spindle crashes, controller failures and equipment breakdown
A CNC machine is often the largest item on the property schedule and the reason a ship date is met or missed. Equipment breakdown cover, which IRMI says has largely replaced the old boiler and machinery policies, pays for sudden mechanical or electrical failure: a drive that burns out, a controller damaged by electrical arcing, an artificially generated power surge. It often adds business income and extra expense while the machine is down. An insurer may add it to the property policy, and we ask for it on shops with high-value machining centers.
It will not pay for a spindle that simply wore out. Wear and tear, gradual deterioration and lack of maintenance are typical exclusions, so maintenance logs, bearing records and surge protection help an adjuster tell a breakdown from age. The property policy with business income handles the fire or windstorm that closes the building; The Hartford’s example is wind lifting a shop roof and halting work during repairs.
Workers’ comp for machinists: class 3632 and its neighbors
Most California job shops report shop payroll under WCIRB class 3632, Machine Shops N.O.C.: machining on a contract or proprietary basis that no other machining, manufacturing or assembly class describes, including contract drilling of printed circuit boards. WCIRB’s pure premium rate for 3632 is $2.600 per $100 of payroll from September 1, 2026, down from $2.650 a year earlier. That figure is a benchmark, not a premium; insurers file their own rates and apply your experience modifier.
The class footnote sends some work elsewhere. A shop using fully automatic screw machines for some or all of its machining goes to 3152(3), Screw Machine Products Mfg., at $3.825. Nut, bolt and screw makers go to 3152(2). FAA-approved employers that make or repair machined aircraft components, without building engines or working on the aircraft, go to 3831, and new auto, truck or motorcycle parts to 3840. If an audit moves you to a class you think is wrong, the classification can be appealed; our California class code guide walks through it.
Workers’ compensation is required of every California employer under Labor Code 3700, and Labor Code 3722 sets a penalty of $1,500 per employee when the state finds a business uninsured. Repetitive strain from daily shop work is one of the claims The Hartford names for this trade.
Purchase orders, vendors endorsements and drawings
OEM and aerospace buyers write insurance into their terms. Published purchase-order riders ask for a $2 million products-completed operations aggregate, and some supplier guides go to $2 million per occurrence and $5 million aggregate. They also want additional insured status, a waiver of subrogation by endorsement, the PO number on the certificate and an ACORD 25 sent with a copy of the endorsement. When a buyer’s minimum sits above your general liability, a commercial umbrella closes the gap.
Distributors that resell your parts often ask for the ISO vendors endorsement, CG 20 15. It extends your products coverage to the vendor for selling your goods, but not for repackaging, for changes the vendor makes to the product or for liability it takes on by contract, and since the 2013 edition the vendor’s protection is capped at the lesser of the contract amount or your limits. Customer CAD models and machine programs on your network are a separate exposure: The Hartford uses a phishing scheme as its example, and cyber insurance handles the data side.
What machine shop insurance costs
Published figures give a starting point; they are industry data, not a Mithril1 quote. The Hartford reports averages across its own small-business customers, not machine shops alone, of about $1,687 a year (roughly $141 a month) for a business owner’s policy, $810 a year for standalone general liability and $1,032 a year for workers’ comp. Insureon’s manufacturer figures, updated in July 2025, put a general liability policy with $1 million per occurrence and $2 million aggregate limits at about $600 a year, or $50 a month, and half of the manufacturers buying through it pay less than that. These describe solo and very small shops at standard limits; established shops with a crew of machinists pay well above them.
General liability is rated mostly on sales and on what the parts go into, workers’ comp on payroll by class, and property on the value of machines and material. As a worked example, $250,000 of machinist payroll in class 3632 at WCIRB’s $2.600 benchmark comes to about $6,500 a year before the insurer’s own rates and your experience modifier. The same payroll in 3152(3) at $3.825 starts near $9,560.
Premiums run higher for aerospace, medical and automotive parts, jobs cut to drawings without signed revisions, large values of customer material on the floor, buyer contracts asking for $5 million aggregates, and dust from metals OSHA lists as explosible, such as aluminum and magnesium. They run lower with documented inspection and lot traceability, revision control, regular chip and dust cleanup, machine maintenance records and a clean loss history. The insurer sets the price once it has reviewed the file.
A few useful answers
Common questions
Does machine shop insurance pay to remake a batch of bad parts?
Remaking your own parts falls outside general liability, which excludes damage to your own product, and a recall is excluded too. The policy answers when the part injures someone or damages other property. Manufacturers’ E&O or recall cover, which we ask insurers about, is where the financial loss belongs.
Our part stopped a customer’s assembly line. Is that a general liability claim?
Usually not, when nothing else was physically damaged. Loss of use of impaired property, meaning a product that works again once your part is repaired or replaced, is excluded from CGL coverage. That is the gap manufacturers’ E&O is built for.
Are customer-supplied castings covered while they are in my CNC shop?
Not under general liability, which excludes property in your care, custody or control. Customers’ goods or bailee coverage on your property or inland marine policy is the line to ask for, with a limit set at the most customer material you hold at once.
What class code is a CNC job shop in California?
Usually WCIRB 3632, Machine Shops N.O.C. Automatic screw machine work goes to 3152(3), FAA-approved aircraft component shops to 3831 and new auto parts to 3840. The insurer and the WCIRB decide the final class from what your shop actually makes.
Why do OEM buyers ask a parts supplier for a $5 million aggregate?
A buyer sets limits to protect its own product line, and published supplier guides run as high as $2 million per occurrence and $5 million aggregate. A commercial umbrella over your general liability is the usual way to reach that figure.
Can a new CNC shop get machine shop insurance through Mithril1?
It can, once an insurer has reviewed the parts you make, the industries they go into and your payroll. We request general liability, property and workers’ comp together so the certificate is ready for your first purchase order.