What is product liability insurance?
Product liability insurance protects you from damage caused by products you manufacture, sell, or distribute. A product can also be a service you provide, like HVAC installation or roofing. In these cases, product liability insurance would cover damages that occur after the service is complete.
Product liability coverage is also called products-completed operations and is included in general liability insurance.
What does product liability insurance cover?
Product liability insurance covers your business if a customer claims one of your products or services caused harm, illness, or damage to someone else. It includes medical care, legal fees, reimbursement costs, and more.
Service-oriented products are covered after the job is done. For example, if a toilet installed by your plumbing company leaks and causes damage to your client's home, product liability insurance coverage can help pay for repairs.
Insurance for product liability also protects products in a supply chain. For instance, say you design a product that's assembled and manufactured elsewhere, and a production issue causes customer injury or illness. You could be held responsible, even if you didn't have anything to do with the defect. In this case, product liability insurance would cover your legal expenses.
What doesn't product liability insurance cover?
Product liability insurance doesn't cover every scenario or risk associated with your goods and services. Exclusions can include:
- Quality control issues: Insurance companies might not cover claims related to issues or product defects that a business knew about but didn't address.
- Employee injuries and illnesses: If a product harms one of your workers, product liability coverage would not pay their medical expenses and lost wages. Instead, those claims would fall under your workers' compensation insurance.
- Product recall costs: Product liability insurance doesn't cover recall costs, which can include notifying customers and disposing of the recalled product. However, you can sometimes add product recall coverage as an endorsement to your insurance policy.
How product liability insurance for small business works
Small business product liability insurance works as a safeguard to minimize financial losses when manufacturing, selling, or distributing products. If a customer claims your business's products cause bodily harm or property damage, this coverage can help.
After an accident occurs, the injured party may file a claim against your business. Once you notify your insurance company about the claim, they'll investigate to see if the product was at fault. You can expect them to ask questions about:
- How the product caused damage
- Whether it was used as intended
- What disclaimers and instructions came with the product
If the product was responsible, your insurer can cover the cost of the claim up to your policy limit.
Manage your risk with recordkeeping
Keeping exhaustive records of your product's lifecycle is a helpful business practice in case of a product liability claim. Good records can demonstrate that your product was manufactured with high standards and concern for your customers' well-being.
How much does product liability insurance cost?
Product liability insurance rates vary by industry and usually consider several factors related to your business, including:
- Type of product
- Consumer base
- Sales volume
- Manufacturing process
- Claims history
- Years in business
Your coverage amount can also affect your premium. Higher coverage costs more, but it provides increased protection in case of a claim. Take your product's entire production cycle into account when considering the coverage you need.
For an accurate picture of how much product liability coverage would cost your business, get a product liability insurance quote on a general liability policy. You can also speak with a licensed business insurance expert to learn more.
Who needs product liability insurance?
Product liability insurance is ideal for small businesses that make, sell, or distribute products. Having the right protections can promote financial stability and build your business's credibility by showing that you stand behind your goods and services. In some industries or states, product liability insurance might be required.
Common professions that benefit from this coverage include manufacturers, wholesalers, and retailers. General liability insurance with products-completed operations coverage can provide the product liability protection these businesses need.
How to get product liability insurance for your small business
We make purchasing a policy simple. Start a quote online or speak to an insurance agent to tailor a general liability policy with product liability coverage to your needs. With the right coverage, you can operate confidently, knowing you are protected now and in the future.
