Most likely, no business wants to cause harm to its customers. However, it's possible that a product you sell or distribute can cause injury, and your business will be sued for it, even if you didn’t manufacture the product directly. If an individual can prove that you knew a problem existed with the product but did nothing to fix it, you can be held liable. This is known as negligence and could spell big legal trouble for your business. To deal with these situations appropriately, consider getting product liability insurance.
A local independent insurance agent can help your business get set up with all the product liability coverage it needs. They'll assess your business's unique operations and products to find the ideal policy and amount of coverage. But first, here's a closer look at product liability insurance, what it is, and how to get it.
Key Takeaways - Product Liability Insurance: What It Is and How to Get It
- Product liability insurance can pay for the cost of third-party bodily injuries or property damage, and your legal defense in a lawsuit related to harm caused by your business's products.
- Your business might be required to have product liability insurance by retailers or suppliers it works with.
- The average cost of product liability insurance is $1,192 per year or about $99.33 per month, but the cost of your business's specific policy can vary depending on your industry, product types, and other factors.
- Working with an independent insurance agent is strongly recommended, as they can tailor a policy to your unique business's industry and coverage needs.
What Is Product Liability Insurance?
The definition of product liability insurance is a special form of business insurance coverage that can reimburse your company for expenses and lawsuits arising from third-party claims of injury or property damage caused by your products. The product that caused harm to a third party could have been manufactured, distributed, or simply sold by your business.
Though product liability insurance coverage is sometimes sold separately, you can also often find it included with general liability insurance. Without this coverage, your business could have to pay potentially hefty lawsuit costs and other expenses out of its own pocket after an unexpected incident.
Product liability insurance vs. general liability insurance
Though they are similar, these two types of coverage have a key difference. Product liability insurance can cover lawsuits and incidents related to the products your business sells, manufactures, or distributes.
In contrast, general liability insurance can cover third-party claims of bodily injury or personal property damage caused at or by your business, such as slip-and-fall injuries on a wet floor. Both of these coverages can pay for the cost of your legal defense in a related lawsuit.
Who Needs Product Liability Insurance?
Many different types of businesses need product liability coverage. Whether you manufacture your own products or simply sell products to the general public, having product liability insurance can help protect your business against potential disasters. Especially if your business is in one of the following industries, this coverage may be right for you:
- Retail
- Beauty and cosmetics
- Electronics
- Clothing and apparel
- Toys and children’s products
- Manufacturing
- Wholesale
- Distribution
- Repairs
- Importing
- E-commerce
- Food and beverage
Even if your business doesn't fall into one of these niches, it may still benefit from having product liability insurance. An independent insurance agent can help you determine if your specific company needs coverage and can help you find the right product liability insurance for manufacturers, product liability insurance for small businesses, and other types of policies tailored to your industry.
What Does Product Liability Insurance Cover?
Product liability insurance can protect your business against several forms of financial losses. These include:
- Attorney, court, and defense costs in a lawsuit
- Judgments or settlements that your business is ordered to pay in a lawsuit
- Medical treatments for injured or ill customers harmed by your products
Not only can product liability insurance cover an affected third party's medical bills, but it can also reimburse your business for all legal costs stemming from resulting lawsuits if the customer sues you. Bodily injury, property damage, and legal defense costs are all covered by product liability insurance.
Common Product Liability Insurance Claims
Several types of product claims can result in lawsuits against your business. The following claims can be covered by product liability insurance:
- Manufacturing or production flaws: If the way you produce a product results in an unsafe product, you can be held responsible.
- Defects in design: If the way your product is designed causes harm to a consumer, whether you manufactured the product or simply sold it, you could be held responsible for damage or injury.
- Defective warnings or instructions: If your product is labeled improperly (i.e., leaves off warnings or contains unclear instructions), and the use of the product results in injury, you could be held responsible.
- Strict liability: If a customer suffers harm caused by a manufacturer's product, your business could still have to pay to defend itself in court, even if you're not found to be negligent.
If your business manufactures, sells, or distributes products to third parties, look into getting product liability insurance to protect against potentially devastating losses from multiple types of claims.
What's Not Covered by Product Liability Insurance?
Product liability insurance doesn't cover everything, including intentional harm to others. These policies tend to exclude the following:
- Employee injuries and illnesses
- Customer injuries and property damage caused by the business premises
- Lost inventory
- Recalled products
- Professional negligence
- Intentional misconduct
Your business can protect against costs associated with worker injuries and illnesses with workers' compensation insurance. For customer injuries or property damage caused by the business premises, a general liability or premises liability insurance policy can help.
Finally, for product recall incidents, look into product recall insurance. An independent insurance agent can help you find your specific policy's product liability coverage exclusions.
How Much Does Product Liability Insurance Cost?
Product liability insurance costs an average of $1,192 per year or about $99.33 per month. However, the average cost of product liability insurance can depend on a number of different factors. These often include:
- Your business's location and size
- Your business's industry and operations
- Your business's specific products
- Your business's prior claims history
- Your business's annual revenue
- The coverage options and limits chosen
Work together with an independent insurance agent to find the most affordable product liability insurance near you.
The Benefits of Product Liability Insurance
There are a few benefits of having product liability insurance for your business. First, this coverage provides essential financial protection from lawsuits that arise due to your business's products. If your brand is properly insured and able to pay for any incidents that arise and impact your customers, this coverage can also help protect your brand's reputation.
Finally, product liability insurance can help your business meet retailer or contract requirements for selling or distributing certain products. An independent insurance agent can further explain why you need product liability insurance for your business.
How to Get Product Liability Insurance
Applying for product liability insurance coverage is easy with the help of an independent insurance agent. These agents know all the information insurers need to get you matched to the ideal policy for your unique business. They'll consider your business's products, industry, annual revenue, and other factors to get you set up with the ideal amount of coverage from one of the top-rated product liability insurance providers in your area.
An Independent Insurance Agent Can Help You Get Product Liability Insurance
The best way to get product liability insurance is to contact an independent insurance agent. These agents have access to multiple insurance companies and policies, so they can shop and compare product liability insurance quotes for you.
They can provide a range of options to help you find the policy that best suits your coverage needs. And down the road, your agent can help you update your policy as your business's needs evolve.
FAQs About Product Liability Insurance
What is the difference between general liability and product liability insurance?
General liability insurance is designed to cover a business against third-party claims of bodily injury or personal property damage, such as slip-and-fall injuries to customers or guests on your premises. Product liability insurance, on the other hand, can cover bodily injuries, property damage, and resulting lawsuits caused specifically by the products your business sells, distributes, or manufactures.
Is product liability insurance required by law?
No, product liability insurance isn't typically required by law, but many retailers and suppliers mandate that you have this coverage to do business with them.
How much product liability insurance coverage do I need?
The amount of product liability coverage your business needs will depend on the types of products it sells, your industry, and other factors.
Do small businesses need product liability insurance?
Yes, even small businesses can benefit from having product liability insurance if they sell, manufacture, or distribute products that can cause some type of harm to the public.
Does product liability insurance cover product recalls?
Product liability insurance often excludes coverage for product recalls. However, you can usually add separate product recall coverage to your policy. An independent insurance agent can help.
Can e-commerce sellers on Amazon or Shopify get product liability insurance?
Yes, sellers on Amazon and Shopify can get product liability insurance. In fact, Amazon requires businesses that earn more than $10,000 in monthly revenue to have this coverage.
How do I file a product liability insurance claim?
You can file a product liability claim directly through your independent insurance agent or insurance carrier. Your agent can contact your insurer for you and keep you updated through every step of the claims process.
Sources
https://www.thehartford.com/general-liability-insurance/product-liability-insurance
https://www.nerdwallet.com/article/small-business/product-liability-insurance
https://www.forbes.com/advisor/business-insurance/product-liability-insurance/
