For manufacturers, machinery is often the lifeline of the business. Whether operating precision CNC tools, automated assembly lines, or heavy processing plants, a manufacturer’s ability to generate turnover is dependent on assets running efficiently. In an economic environment characterised by high energy costs and tight margins, challenges highlighted extensively in Make UK reports, there is perhaps an even greater pressure on such machinery assets.
In some cases, businesses are running machines harder and for longer, sometimes without the downtime windows previously set aside for preventative maintenance. ‘Sweating assets’ in this way can create a dangerous vulnerability: as equipment is pushed to its limit, the risk of failure rises. It is often the case that the loss suffered by a machine being out of service is far greater than the cost of repairing or replacing it; it is usually a given that insurance is needed for repair or replacement in the event of a insured loss, but the losses that Business Interruption can cater for, such as lost profits whilst they’re out of action, can be overlooked.,
This blog explores why some standard insurance policies can leave manufacturers exposed and how specific areas of cover, including Machinery Damage and Business Interruption, can provide the necessary resilience.
The True Cost of Downtime
In manufacturing, time really is money. When a critical machine stops, overheads like wages, rent, and energy standing charges continue to run, but turnover can cease instantly.
The Allianz Risk Barometer 2025 consistently ranks Business Interruption as one of the top global business risks, noting that in an interconnected supply chain, a failure in one specific machine can cause a bottleneck that halts an entire operation, which manufacturers will likely have experienced at one time or another for themselves.
For many manufacturers, relying on standard insurance policies to mitigate these risks may be a costly mistake.
The “All Risks” Misconception
An issue we regularly encounter is the misconception that standard Commercial Property or “All Risks” insurance covers machinery if it breaks. In reality, standard property policies are designed to cover losses resulting from external insured events, such as fire, flood, theft, or storm damage.
They generally exclude internal causes of failure and certainly failure due to wear and tear or a lack of proper maintenance. This means that if a critical piece of equipment fails due to electrical arcing, a power surge, mechanical seizing or the snapping of a component, a standard policy will likely not pay for the repairs. More worryingly, because the physical damage isn’t covered, the Business Interruption section of that policy will not trigger either. This leaves the manufacturer facing a double financial blow: paying for expensive repairs out of cash flow while simultaneously absorbing significant revenue losses due to the interruption to operations.
Closing the Gap with Specialised Cover
To support true operational resilience, manufacturers require a more tailored approach to their insurance that addresses both the physical assets and the financial consequence of failure through Machinery Breakdown and Business Interruption insurance.
1. Machinery Damage & Breakdown Insurance (The Asset)
Machinery Breakdown insurance is designed to protect against sudden and unforeseen damage caused by internal faults. This includes common issues such as electrical burnout and mechanical failure but importantly, it also covers operator error — one of the most frequent causes of damage in busy factories.
2. Business Interruption (The Revenue)
Cover for the repair of the machine is only half the solution; the associated Business Interruption cover is often critical. If a machine suffers a breakdown covered by the policy, this insurance can kick in to cover the financial loss resulting from the downtime. It can also cover “Increased Costs of Working”, providing funds for temporary solutions to keep production moving, such as outsourcing work, hiring replacement machinery or paying overtime to clear backlogs once repairs are complete.
Tailored Manufacturing Expertise
Arranging these policies requires specialist knowledge, particularly regarding Indemnity Periods. A common pitfall for manufacturers is selecting an indemnity period for Business Interruption cover that is too short for the current economic climate and business’s specific circumstances. The indemnity period is the length of time the insurer will cover you for; once this time passes, even if you are not up and running again yet, this will determine the end of the cover period.
Post-Brexit trade friction and global supply chain volatility mean that sourcing specialist replacement parts or commissioning new bespoke machinery from Europe or Asia can now take significantly longer than in previous years. If a manufacturer has a 12-month indemnity period but a replacement machine takes 18 months to manufacture, ship and commission, the business is left financially exposed for six months of lost trading.
At McClarrons, we work with manufacturers to support you with the arrangement of Engineering Inspections and identify potential single points of failure. We can help explain the areas you should consider when deciding on a suitable indemnity period for your business, helping to ensure that if the worst happens, your cover matches the reality of the supply chain.
To discuss a review of your machinery and business interruption exposures, contact McClarrons’ specialist Commercial Manufacturing team on 01653 609151 or at commercial@mcclarroninsurance.com.
