If your small business creates, manufactures, or sells products, you should consider carrying Product Liability Insurance
In this Ultimate Guide, we’ll define what Product Liability Insurance is, what it does and doesn’t cover, scenarios where a business might need a policy, what it costs, and recommend where to look for competitively priced insurance.
What is Product Liability Insurance?
Product Liability Insurance protects business owners from damages and legal fees should the use of their products result in property destruction, injury, illness, or death of the user.
Even in situations where your product was misused by the person who was harmed, you could still face significant legal fees proving your case. If found liable, the damages could be significant enough to shutter your business if you don't carry Product Liability insurance.
Businesses can purchase it as a standalone product or can bundle it with General Liability Insurance. Be sure to ask your agent if Product Liability is part of your current coverage.
What Does Product Liability Insurance Cover?
If a product you make, serve, or sell causes property damage, injury, illness, or death, Product Liability Insurance would cover the damages and legal expenses that arise.
What Doesn't it Cover?
If a product is recalled by the original or parts manufacturer, a Product Liability insurance policy won't cover the expenses, legal or otherwise, that arise.
Product Liability insurance does not cover employee injuries, damaged products, or accidents involving customers, this is where General Liability, Inland Marine, or Workers’ Compensation insurance come into play.
What's a Situation You Would Need Product Liability Insurance?
You’re a coffee shop owner and serve a customer a hot cup of coffee in a to-go cup. However, the lid is not secured properly and pops off. It scalds the customer’s hand, who then requires extensive medical attention to recover.
In another situation, a customer purchases a bicycle at your shop. A few days later, the forks break while she is out riding, and is badly injured. Not only is the bike shop held liable for the product liability, but the bicycle manufacturer might be as well.
In both of these instances, a Product Liability Insurance policy would cover the damages, medical bills, and legal fees, up to the policy limit.
How Much Does Product Liability Insurance Cost?
Product Liability coverage is usually included in a General Liability policy, which runs between $30 to $200 per month. Your cost will vary based on the products you sell, how much you sell, and the number of parties involved in their production.
Who Needs Product Liability Insurance?
Even the most conscientious companies can miss design defects or a defective product in the manufacturing process before it ships. Therefore, every company that produces a physical product needs Product Liability Insurance.
Even a cup of coffee and a sandwich are products that you serve to the public. If someone is hurt, harmed, or killed by your product, the legal fees and damages to your small business could be catastrophic.
As previously mentioned, Product Liability coverage is normally included in General Liability Insurance, but check with your broker to ensure that it is included in your business insurance package before purchasing.
Where Can You Get Product Liability Insurance?
Product Liability insurance is available from numerous insurance providers —brick and mortar as well as online. We've partnered with Next Insurance and their rates start at just $25 per month. Use our partner link to get a free quote.
Learn more about 12 other types of insurance. Take a look at our Ultimate Guide to Selecting Business Insurance.
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