Ask most manufacturers what their factory insurance covers and the answer comes back quickly: the building. It is the obvious thing — the largest single asset on the balance sheet and the one the bank or landlord insists is insured. But for a working factory the building is rarely where the real exposure sits. The machinery on the floor, the stock in the racking, the orders you cannot fulfil while a line is down, and the liabilities that follow a product out of the gate are where a serious loss is made or survived.

This guide is written for factory owners, operations managers and finance directors across manufacturing, engineering, packaging, printing, woodworking and metalworking. It walks through what factory insurance in the UK actually needs to cover beyond the four walls, the limits and indemnity periods that catch businesses out, and the mistakes we see most often when reviewing existing policies. If you take one thing from it, make it this: in manufacturing, the building is usually the cheapest part to replace and the easiest to over-focus on.

Why “factory insurance” is more than buildings cover

There is no single off-the-shelf “factory insurance” policy. The term describes a package — usually a commercial combined policy — assembled around how your site actually operates: what you make, the machinery you run, how much stock you hold, and where your finished goods go. A package built only around the building value leaves the parts that keep the business running underinsured or missed entirely.

Cornerstone arranges factory and manufacturing cover for businesses across the East Midlands and nationally, from power generation and domestic appliance manufacturers to packaging, electronics, printing and metalworking firms — including the higher-hazard processes that standard insurers are reluctant to take on. The sections below cover each element of a proper factory policy and where the gaps tend to appear.

The covers most factories actually need

Buildings — and how they’re valued

Buildings cover still matters, but the figure it is insured for is where factories most often go wrong. The sum insured should be the full cost of rebuilding — including demolition, site clearance, professional fees and bringing the structure up to current building regulations — not the market value or the price you paid. Underinsure the building and the “average” clause lets the insurer cut a partial-loss payout by the same proportion you were underinsured. A periodic reinstatement valuation is the simplest protection against that.

Machinery, plant and contents

For most manufacturers the plant on the floor is worth far more than the shell around it. Contents cover should reflect the true replacement cost of machinery, tooling, fixtures and fittings — and it is worth being clear whether the policy settles on a reinstatement (new-for-old) or indemnity (wear-and-tear deducted) basis, because the difference on a CNC machine or a production line is substantial. Don’t forget plant you hire in or hold on lease, which a hire agreement usually makes your responsibility.

Machinery breakdown (engineering)

Standard contents cover responds to fire, theft, flood and impact — not to a machine that simply fails. Machinery breakdown, or engineering cover, insures sudden mechanical or electrical failure of plant: a burnt-out motor, a control failure, a press that seizes mid-run. For a factory whose output depends on a handful of critical machines, leaving breakdown off the policy is one of the most common and most expensive gaps we find. It often pairs with statutory inspection of pressure vessels, lifting equipment and the like.

Stock and goods in transit

Raw materials, work in progress and finished goods all need to be insured, and stock levels in a factory swing through the year — a sum insured set in a quiet month leaves you short at peak. Where stock values rise seasonally, a declaration-linked policy avoids underinsurance. Once goods leave the site they need goods in transit cover, and if you run your own vehicles to move them it is usually worth reviewing those alongside transit risk; our guide to fleet cover explains how that fits together.

Business interruption — the cover that saves the business

If a fire or flood stops production, the building can be rebuilt — but the lost gross profit, the wages you keep paying and the customers who go elsewhere are what actually threaten the business. Business interruption (BI) covers that loss of income while you recover. Two settings decide whether it works: the sum insured, which should be based on annual gross profit (and rising stock and order books), and the indemnity period — the maximum time the policy will pay out. Manufacturers routinely choose 12 months, then discover that sourcing and installing a replacement specialist machine, or rebuilding to modern standards, takes far longer. For most factories 24 or 36 months is more realistic. Extensions for loss caused by damage at a key supplier or customer, or by denial of access to your site, are well worth considering too.

Liability cover — public, employers’ and product

Three liabilities sit at the core of any factory policy. Employers’ liability is a legal requirement if you employ anyone, with a statutory minimum limit of £5 million (£10 million is provided as standard on most policies). Public liability covers injury or damage to third parties — typically arranged at £5 million, with larger customers and contracts often demanding £10 million. The one manufacturers must not overlook is product liability: it covers harm caused by a product after it has left your premises, and for anyone making, assembling or even rebranding goods it is essential. Export sales — particularly to the United States and Canada — change the risk significantly and must be declared.

The extras that quietly matter

Beyond the core, a factory policy usually folds in money cover, glass, theft including damage caused by forced entry, and replacement of locks and keys. Two modern exposures deserve a deliberate decision rather than a default: environmental or pollution liability, which standard public liability often excludes despite the real risk around chemicals, dust and effluent on a manufacturing site; and cyber cover, now that production lines, design files and customer data all live on connected systems. Neither is automatically included, and both are increasingly relevant to manufacturers.

The mistakes we see most often on factory policies

• Buildings or machinery insured at market or book value rather than full reinstatement cost — triggering an average reduction at claim stage.
• Business interruption sums insured based on turnover instead of gross profit, leaving a serious shortfall.
• A 12-month BI indemnity period on a factory that would take far longer to source and recommission specialist plant.
• Machinery breakdown left off the policy, so a failed (rather than damaged) machine isn’t covered.
• Stock sums insured set for a quiet period and never adjusted for seasonal or order-driven peaks.
• No product liability, or export sales to the US and Canada left undeclared.
• Higher-hazard processes — spraying, heat, dust, solvents — not disclosed, putting the whole policy at risk.

How a site visit changes the conversation

Most underinsurance is not deliberate — it builds up quietly as a factory grows, buys new machinery and takes on bigger orders while the policy is simply renewed each year. The single most effective way to catch it is a proper look at the site. A broker who walks the floor sees the new line that was never added to the schedule, the stock peak the sums insured don’t reflect, the process change that alters the fire risk, and the export contract that needs declaring.

That is exactly why Cornerstone offers to visit your premises rather than quoting blind from a form. Getting the survey and the sums insured right at the outset is what makes a claim pay properly when it matters, and it is the kind of detail an online quote will never capture. It also supports our wider business insurance reviews for manufacturers who run offices, warehousing or other operations alongside the factory.

How Cornerstone helps

Cornerstone is an independent insurance broker based on New Walk in Leicester, arranging factory and manufacturing insurance for businesses across the East Midlands and nationally. We place cover through recognised insurers, specialist markets and Lloyd’s brokers, which means we can accommodate higher-hazard processes and the difficult-to-place risks that standard insurers decline. Every client gets a dedicated account executive who reviews the cover against how your factory actually runs — and, where it helps, comes out to see it.

Well-run manufacturers with good housekeeping, maintenance and claims records are exactly who we are set up to help, and our reputation is built on referrals. When a claim does happen, we support clients through the process and escalate directly to underwriters when it matters, rather than handing you to a call centre — part of the total customer care every client receives. To request a factory insurance quote or a review of your existing cover, call us on 0116 3440 040 and ask for Tim Lee, or request a call-back. During working hours we aim to come back to you within 30 minutes.

Frequently asked questions

Is factory insurance a legal requirement in the UK?

Only employers’ liability is required by law, and only if you employ staff. The rest — buildings, machinery, stock, business interruption, public and product liability — isn’t legally compulsory, but lenders, landlords and customers almost always require it, and no manufacturer should operate without it.

What’s the difference between contents cover and machinery breakdown?

Contents (or plant and machinery) cover responds to external events such as fire, theft, flood and impact. Machinery breakdown covers the machine failing in itself — a mechanical or electrical fault. They do different jobs, and a factory reliant on key machines usually needs both.

How long should my business interruption indemnity period be?

Long enough to fully recover — rebuild, replace specialist plant, and win customers back. Many manufacturers default to 12 months and find it too short; 24 or 36 months is often more realistic where bespoke machinery or major reinstatement is involved.

Do I need product liability insurance?

If you make, assemble, rebrand or supply goods, almost certainly yes. Product liability covers injury or damage caused by your product after it leaves your premises, which public liability does not. Export sales, especially to the US and Canada, materially change the risk and must be declared.

Can you cover higher-hazard or previously declined factory risks?

Often, yes. Through our specialist underwriters and Lloyd’s brokers we can place processes and risks that standard insurers turn away — from spraying and heat treatment to dust- and solvent-heavy operations. Speak to a factory insurance specialist about the specifics.

How much does factory insurance cost?

It depends on your trade and processes, the rebuild and machinery values, stock levels, turnover, claims history and how the site is managed. Because manufacturing risks vary so widely, the only reliable figure is a quote based on your actual operation.

Request a factory insurance quote

To be sure your cover goes well beyond the building, request a factory insurance quote or a no-obligation review of your existing policy — call 0116 3440 040 and ask for Tim Lee, or request a call-back. Where it helps, we’ll arrange a site visit so the cover is built around how your factory really works.