4 Policies Tool Manufactures Need to Protect Their Business?

The tool manufacturing industry is growing steadily, fueled by demand across construction, industrial, and consumer markets. For tool manufacturers, the global “hand tools and woodworking tools” market size was valued at $10.3 billion in 2022 and is expected to expand at a compound annual growth rate of 5.1% from 2023 to 2030. As tool manufacturers face increasing opportunities—and, with them, increasing risks—having the right insurance coverage is essential to protecting their operations, reputation, and long-term success.

At Central, we understand that no two tool manufacturers are alike. Whether you’re designing specialized cutting tools for industrial clients or producing equipment for broader consumer use, your business needs insurance solutions built to match your unique exposures. 

In this article, Rachel Pinsonneault—commercial lines staff underwriter at Central Insurance—offers a closer look at what factors tool manufacturers should consider when choosing their coverage.

Understanding the Unique Risks Tool Manufacturers Face

As a tool manufacturer, you may face a wide array of risks in your work depending on the types of tools you produce and the end users of those tools. 

For many toolmakers, the biggest risks stem from designing products to customers’ specifications. A misfiled tool, a component that isn’t strong enough for its intended use, or a product defect can all result in serious injury to an end user and significant liability for your business.

“Tool manufacturers have to always think about how the end user’s going to use the piece of equipment they create,” Pinsonneault says. “If a tool isn’t filed down properly during manufacturing and it then cuts someone’s finger when it’s used, or if a tool isn’t made strong enough to withstand the work it’s designed for, those kinds of things can result in costly claims as well as injuries.”

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In addition to product concerns, Pinsonneault explains that tool manufacturers rely heavily on specialized machining equipment to create precision parts. This equipment is not only expensive but also vital to daily operations, meaning any breakdown could bring production to a halt.

In Pinsonneault’s experience, manufacturers who serve niche markets often face fewer risks than those who produce a large variety of products. This is because they typically emphasize higher-quality craftsmanship, maintain closer customer relationships, and supply their tools to more experienced end users. This combination helps lower the chances of product failures and liability claims. 

She emphasizes, however, that even with these advantages, their work demands a careful focus on long-term durability, safety, and quality control to avoid potential claims.

Learn More: Loss Control Hazard Assessments for Your Business

Essential Insurance Coverages for Tool Manufacturers

With over 145 years of experience protecting businesses across the country— including supporting manufacturers of all shapes and sizes—Central is uniquely equipped to understand the challenges tool manufacturers face and the insurance policies that protect against them.

Here, Pinsonneault recommends the core coverages every tool manufacturer should consider to help safeguard their business:

1. Property Coverage for Business Personal Property and Equipment

Your machinery, raw materials, and finished inventory represent significant investments. Commercial property insurance provides financial protection for these assets against fire, theft, and other covered losses. 

In addition, equipment breakdown coverage is crucial for tool manufacturers who depend on precision machines. If a critical piece of equipment sustains physical damage due to a covered equipment breakdown accident, this coverage can help cover repair or replacement costs and minimize downtime.

Did You Know: Central’s equipment breakdown protection also includes access to specialized resources and engineering support through our reinsurer partners, giving you an extra layer of confidence.

2. Product Liability Insurance

The specific tools manufacturers produce can bring about certain risks just by the nature of the products themselves. 

“Tools like knives or saws are going to have inherent dangers, which is unavoidable,” Pinsonneault says. “While a manufacturer won’t be liable for a saw simply being sharp, they could be liable if it is determined the tool is defective and unreasonably dangerous.” 

This is where product liability coverage comes in. This policy is designed to help protect your business from costly lawsuits, legal defense expenses, and settlement payouts. Without it, you could be held responsible if a tool you manufacture causes bodily injury or property damage—even when used correctly. 

Remember: While inherent risks exist with all tools (like sharp blades or heavy impact), having strong product safety protocols in place can help mitigate exposure—and choosing a carrier like Central who understands these nuances makes all the difference.

3. General Liability Coverage

General liability insurance for manufacturers is a critical safeguard that protects your business beyond your products. It covers third-party claims of bodily injury, property damage, and personal or advertising injury resulting from your business operations.

For tool manufacturers, Pinsonneault explains that common general liability risks might include a visitor slipping and falling at your manufacturing facility, damaging a vendor’s property during a business visit, or even receiving allegations of copyright infringement based on a certain marketing campaign. Without proper coverage, even a simple accident on your premises could result in costly legal battles, settlements, and harm to your company’s reputation.

At Central, we tailor general liability coverage to the unique needs of tool manufacturers, ensuring you have broad protection that complements your other policies and provides peace of mind as your business grows.

4. Workers’ Compensation Insurance

Workers’ Ccompensation insurance is essential if your employees are involved in any part of the manufacturing, packaging, or distribution process. This coverage helps pay for medical expenses and lost wages if an employee is injured on the job—protecting your team and your bottom line.

The Central Difference: Even highly skilled manufacturing environments are prone to accidents. That’s why having a carrier who understands industry-specific loss control practices can significantly lower your risk and claims costs.

Why Tool Manufacturers Choose Central Insurance

At Central, we specialize in protecting manufacturers like you. Our dedicated underwriters, claims specialists, and loss control experts work closely with you to find the coverage that meets your operation’s exact needs.

Your tools are built for precision, strength, and performance. Shouldn’t your insurance partner be, too?

When you choose Central, you gain:

• Industry expertise in manufacturing and specialized production risks.
• Proactive loss control support to help prevent claims before they happen.
• Responsive, personalized service from a team with a deep understanding of your industry’s challenges. 
• Financial stability you can trust, backed by 150 years of experience and an “A” (Excellent) A.M. Best rating.
• A true partnership—not just a policy.

Ready to safeguard your future? Ask your local agent about Central Insurance today and experience the difference a specialized carrier can make.