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Hardware & Electronics Insurance: Protecting Businesses that Manufacture or Supply Physical Technology
Hardware and electronics businesses operate at the intersection of physical product risk, software dependency, and cyber risks. A defective component, software error, or manufacturing process can create product liability claims, recall costs, contractual disputes, operational downtime, and reputational damage.
Design, Manufacture, Assembly, Supply or Support of Physical Technology
Hardware & Electronics Insurance is designed to protect businesses that design, manufacture, assemble, distribute, install, integrate, or support physical technology products.
This may include IoT devices, industrial sensors, robotics, semiconductors, microchips, printed circuit boards, consumer electronics, medical electronics, smart infrastructure, communications hardware, and embedded systems.
A specialist technology insurance programme should recognise the scope of activities, whether that includes design, prototyping, firmware, manufacturing, component sourcing, testing, logistics, installation, cyber connectivity, and product recall. At Indemnity, we help hardware and electronics businesses structure insurance around failure points, contractual requirements, and balance sheet protection.
Access to London Market Technology Insurers
Hardware & Electronic Risk Matrix
Blended Technology Coverage Designed for Hardware
Traditionally insurers would treat technology and financial services as completely separate industries. However, there are now a growing number of insurers with products available that can afford blended cover to a failure of technology in a highly regulated financial service environment.
Product Liability & Efficacy
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Specialised Product Liability Insurance protects against claims arising from physical products that cause injury, property damage, or other covered third-party loss. For hardware and electronics firms, this may involve allegations that a device overheated, shorted out, caught fire, damaged client property, injured an end user, or failed in a safety-critical environment.
Product Liability should be reviewed carefully for design defects, manufacturing defects, labelling failures, warnings, instructions for use, imported components, contractual indemnities, and territorial or jurisdictional exposure.
Efficacy risk is also important and maybe excluded, unless expressly provided. Whilst a standard Product Liability policy may respond to bodily injury or property damage, it does not always respond to financial loss caused by a product failing to perform its intended function.
Technology E&O and Cyber
Hardware is increasingly reliant upon software. Firmware, embedded code, microcontroller logic, API connections, and cloud dashboards can determine whether the physical product operates safely and reliably.
Technology Errors & Omissions Insurance, also known as Tech PI, protects against claims alleging that technology services, software, firmware, installation, design or specification caused a client financial loss.
For example, if a firmware update disables a client’s operational network or causes connected devices to stop reporting critical data, the loss may not be treated as a traditional Product Liability claim. There may be no injury or physical damage. The client’s loss may be business interruption, lost revenue, rectification cost, contractual penalty, or service failure.
A standard Cyber policy may also be insufficient if the issue is not a malicious attack but a technology performance failure. This is why hardware and electronics businesses should review Technology E&O alongside Product Liability and the scope of your Cyber coverage.
Standalone Product Recall
Product Recall Insurance protects against the financial costs of withdrawing, recovering, testing, replacing, repairing, or disposing of defective or unsafe products. For hardware and electronics businesses, recall costs can extend far beyond the replacement value of the unit.
For hardware businesses with global supply chains or embedded components, recall can become one of the most expensive loss scenarios in the programme. The cover is typically offered on a standalone basis in combination with a Technology Combined product.
Specialised Industry Sector Frameworks
Hardware and electronics businesses are not one uniform risk category. A consumer electronics distributor, industrial IoT manufacturer, semiconductor design, robotics integrator, or fabrication plant each present different exposures.
A strong underwriting presentation should clearly explain the type of products, use case, end users, component sourcing, manufacturing model, testing procedures, quality controls, territories, installation responsibilities, and contractual liability profile.
IoT & Connected Devices
IoT and connected device businesses face cyber & physical risk because hardware failures can immediately affect digital networks, operational workflows, and client supply chains.
Claims may arise where a device fails to transmit data, sends inaccurate readings, becomes inaccessible, creates a cyber vulnerability, or causes a client’s automated process to stop.
For industrial IoT, the potential loss can be severe. A failed sensor may halt production. A gateway outage may disrupt logistics. A robotics control failure may damage client equipment.
Semiconductor & Advanced Electronics
Semiconductor and microchip businesses present a different risk profile because production depends on highly specialised equipment, controlled environments, precision processes, and long replacement lead times.
For semiconductor and advanced electronics businesses, Business Interruption Insurance can be as important as physical damage cover.
Semiconductor and microchip firms should avoid generic property assumptions. The reinstatement timeline may be significantly longer than standard commercial property models suggest.
Supply Chain & Contractual Risk
Hardware and electronics businesses can depend on global component suppliers, contract manufacturers, distributors, logistics providers, installers, and specialist testing partners. This creates supply chain risk and contractual liability exposure.
A business may be contractually responsible to its client even where the root cause sits with an upstream supplier. Insurance should therefore be reviewed alongside supplier contracts and customer agreements. The policy may not cover every indemnity, guarantee, warranty, or performance obligation accepted under contract. Read our guide about contract risk management.
Product-led Technology Management Liability
Management Liability protects directors, officers, senior managers, and the corporate entity against claims arising from the way the hardware or electronics business is governed, financed, supervised, and controlled.
This is particularly important for product-led technology companies where board decisions may be scrutinised following a product failure, recall event, supply chain disruption, cyber incident, funding dispute, insolvency pressure, or regulatory investigation.
A Management Liability programme can include Directors and Officers Insurance, Employment Practices Liability, and Corporate Legal Liability. For hardware and electronics firms, this helps protect leadership teams against allegations connected to health & safety breaches, corporate manslaughter, and quality control oversight failures.
Expert Open Market Placement & Claim Advocacy
Hardware and electronics insurance is a specialist placement because physical products, embedded software, cyber risk, recall exposure, and supply chain dependencies often interact.
At Indemnity, we help hardware and electronics businesses compare coverage. We assess whether the insurance programme reflects the claims scenarios most likely to affect the business.
Claim Advocacy
Claims advocacy is particularly important for hardware and electronics businesses because losses often involve overlapping technical, contractual, and causation issues. A single incident may trigger multiple product lines.
We can help coordinate insurer engagement, challenge coverage reservations, and ensure that forensic reports, testing data, customer contracts, supplier agreements, and loss calculations are properly understood.
Effective claims advocacy can be critical to accelerating insurer response and protecting the business when an incident threatens customer confidence and revenue.
Fair Value Statement
For hardware and electronic businesses, we offer provide fair value in line with the FCA Consumer Duty. We assess insurer solutions based on their financial strength, wording quality, claims performance, and their ability to support your ongoing requirements.
Frequently Asked
Questions
How do we structure insurance if our hardware design is in-house but assembly is outsourced to an overseas manufacturer?
If your brand name is on the box, which means your company will face the initial legal liability. To protect your balance sheet, we recommend two things:
- We structure your Products Liability to act as a primary shield, meaning your insurer defends you first rather than waiting to dispute who is at fault.
- You audit your contract manufacturing agreements to ensure there are hold-harmless clauses in your favor. Then verify that your overseas manufacturer has appropriate insurance protection. Allowing your insurer to successfully subrogate the loss, if their manufacturing process caused the defect.
Where does our Cyber policy end and our Product Liability begin if a software glitch causes physical damage?
If a software update sent to your connected IoT devices or smart hardware causes them to malfunction, overheat, and damage a customer's facility, situations can arise whereby insurers for seperate policies take different positions on the proximate cause of loss.
We resolve this by placing a Blended Tech E&O and Products Liability policy underwritten by a single specialist insurer. This ensures that whether the proximate cause is a physical failure or a virtual line of code, the resulting damage is fully covered without any disputes.
Does standard Product Liability cover the cost of executing a product recall?
No. Standard Products Liability only triggers after your product has actually caused bodily injury or property damage. To cover this exposure, you’ll need a Product Recall policy that can fund expenses of pulling products from the market,, customer notifications, warehouse storage, safety testing, and physical disposal.
If your component is integrated inside a larger machine, we also provide Product Extrication cover, which pays the labor costs to physically dismantle your client's machinery, extract your faulty component, and install the replacement.
Can you assist with wareable healthtech devices?
Yes. Please see our dedicated page for digital healthtech products.
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