Product Liability Insurance: Protecting Your Business

Running a business that produces or sells products comes with its unique set of risks. Even with the best quality control systems in place, there is always the possibility that something could go wrong. If your product harms someone, your business could be held liable for damages. Product liability insurance is designed to protect your business from these types of liabilities. This article will explain what product liability insurance is, who needs it, and how it works.

What is product liability insurance?

Product liability insurance is a type of insurance coverage that provides protection to businesses that produce or sell products. It covers the cost of legal fees, settlements, and damages if a customer or third party sustains harm as a result of using your product. This type of insurance is essential for businesses that manufacture, distribute, or sell products, as it helps protect them from the high costs of lawsuits.

How does product liability insurance work?

If someone is injured or suffers damages as a result of using your product, they can file a product liability claim against your business. Product liability insurance covers the cost of legal fees and damages that you may be required to pay in such a situation. Typically, product liability insurance policies provide coverage for legal defense costs, settlements or judgments, and medical expenses incurred by the injured party.

For example, let’s say you own a furniture business and a customer purchases a chair from you. If that chair collapses and injures the customer, they could file a product liability claim against your business. If you have product liability insurance, the insurance company will cover the cost of legal fees, settlements or judgments, and any medical expenses incurred by the injured party.

Who needs product liability insurance?

Any business that produces or sells products should have product liability insurance. This includes businesses that manufacture products, businesses that distribute products, and businesses that sell products. Even if your business is not directly involved in the production of the product, you could still be held liable if someone is injured as a result of using it. Product liability insurance helps protect your business from these types of liabilities.

What does product liability insurance cover?

Product liability insurance covers the cost of legal fees, settlements or judgments, and medical expenses incurred by the injured party. It typically provides coverage for injuries sustained as a result of using your product, including bodily injury and property damage. Some policies may also cover damages resulting from defects in the product design or manufacturing process.

It’s important to note that product liability insurance is not the same as general liability insurance. General liability insurance typically covers bodily injury and property damage caused by your business operations, but it may not provide coverage for product liability claims.

Types of product liability insurance

There are several types of product liability insurance policies available, including:

Occurrence-based policies

Occurrence-based policies provide coverage for claims that occur during the policy period, regardless of when the claim is filed. For example, if a product that was sold three years ago causes an injury, but the claim is filed today, an occurrence-based policy would cover the claim as long as the injury occurred during the policy period.

Claims-made policies

Claims-made policies provide coverage for claims that are filed during the policy period. This means that the policy must be in effect at the time the claim is filed, regardless of when the injury occurred. Claims-made policies typically have lower premiums than occurrence-based policies, but they may not provide as much coverage.

Product recall insurance

Product recall insurance provides coverage for the costs associated with recalling a product that poses a potential risk to consumers. This can include the cost of notifying consumers, shipping and handling costs, and the cost of replacing the product. Product recall insurance is usually purchased as a separate policy.

FAQ

How much does product liability insurance cost?

The cost of product liability insurance varies depending on several factors, including the type of product you produce or sell, the risk associated with the product, and the amount of coverage you need. Generally, businesses can expect to pay between $500 and $3,000 per year for product liability insurance.

What happens if I don’t have product liability insurance?

If your business does not have product liability insurance and someone is injured as a result of using your product, your business could be held liable for damages. This could result in costly legal fees, settlements, and judgments that could put your business at risk of bankruptcy.

What types of products are covered by product liability insurance?

Product liability insurance covers any type of product that you produce or sell, including consumer goods, industrial products, and medical devices.

Can I be sued for using a product that I purchased?

If you are injured as a result of using a product that you purchased, you may be able to sue the manufacturer or distributor of the product. However, as a consumer, you would not be required to have product liability insurance.

What should I do if I receive a product liability claim?

If you receive a product liability claim, the first thing you should do is contact your insurance company. They will provide guidance on how to proceed and may assign a lawyer to defend your business against the claim.

Conclusion

Product liability insurance is essential for any business that produces or sells products. It helps protect your business from the high costs of lawsuits and provides peace of mind knowing that your business is protected in the event that something goes wrong. By understanding what product liability insurance is, who needs it, and how it works, you can make informed decisions about protecting your business.