If you're a business owner, you're responsible for every product you import, manufacture, distribute or sell. Product liability lawsuits can be expensive, stressful and time-consuming—not to mention that they can destroy trust with your client base and ruin your brand reputation. Product liability insurance is a necessity for all businesses involved throughout the commerce chain, including anyone who sells, manufactures or distributes a product—including food products.
Products can cause physical injury, property damage and economic losses for consumers who use them. This can result in product liability lawsuits. For example, a person who gets severe food poisoning because of a food product you produce could wind up in the hospital and incur medical costs. Likewise, faulty laundry detergent might damage a consumer's clothing. If you produce mechanical parts for cars, trains or airplanes, faulty products could cause serious harm, injury or even a fatality.
And, it's not just manufacturers who need product liability insurance. Perhaps you didn’t manufacture that faulty laundry detergent, but if you sell it in your store you could also be liable. This can result in devastating financial losses—especially if you don't have the appropriate coverage.
Guard your company against such high costs with product liability insurance. Usually, this coverage forms part of a standard commercial general liability policy. But, depending on the type of product you produce or sell, you may need additional product liability coverage. A qualified Krywolt Insurance broker will be able to let you know whether your business requires a standalone policy or not.
It's important to keep in mind that it's not only B2C (business to consumer) enterprises that can wind up facing a lawsuit should there be an issue with a product you make/sell/distribute. B2B (business to business) industries face the same risks as any other product-related industry.
Product liability insurance protects your business against legal liability for claims of bodily injury and property damages arising from a product defect. This could range from a severe allergic reaction to jewellery that was sold as hypoallergenic or a frozen pizza that gave a consumer severe food poisoning, to a vacuum that ruins a customer's carpet. With product liability coverage, your business is protected from legal action, legal costs and compensatory damages.
Anytime you're working as part of the commerce chain—including producing, importing or selling products—you need to have a risk management plan that helps to reduce product liability claims by carefully considering product safety and any risks associated with the product. This will also help strengthen your businesses' defense position in the event of legal trouble because of a product defect or improper warning.
Product liability insurance is key for protecting your business from legal expenses should you wind up in a lawsuit because of a product issue—regardless of where your business falls on the supply chain. However, there is a wide range of additional insurance coverage options that you should consider as part of your business insurance. The following coverages will help protect you against third-party claims, financial losses and damage to your property—all of which could seriously impact your business operations.
Commercial Auto Insurance: If you use a vehicle for business purposes, such as dropping off deliveries or driving to meet clients frequently, it's important your vehicle is adequately protected with commercial auto insurance.
The limits on product liability insurance will vary depending on whether you decide to get basic coverage or opt for advanced coverage. However, typically the limits on a product liability insurance policy ranges between $1,000,000 and $5,000,000. Usually, this policy's limit is part of a general liability insurance policy’s limit.
While a qualified broker at Krywolt Insurance will be able to ascertain your business' unique coverage needs and help you choose the right policy for you, it's important that you opt for a product liability insurance policy that:
The primary factor that determines your product liability insurance cost is the amount of potential danger associated with your goods. If you work in a high-risk industry, your costs will naturally be more. However, there are other factors that influence your insurance premiums, including:
No. In most industries, product liability insurance is not mandatory. That said, it's strongly recommended, especially if you sell, produce or distribute products that could easily result in claims against you—such as in the cosmetic and food industries. For instance, skin creams can lead to reactions and food items may cause food poisoning.
Product liability insurance is essentially more focused than general liability insurance, as it only extends to damages being caused by a product you sold or manufactured. Alternatively, general liability provides protection for a wide range of instances where a third-party's property is damaged or is physically harmed on your premises.
For instance, if your employee is mopping and a customer slips and falls, the subsequent insurance claim would be covered by general liability. But if a customer uses your product and has an allergic reaction, that would be covered by product liability.
If you sell, distribute, import or manufacture any type of goods—including food, clothing or technology—then you should have this coverage. It will protect your company in the event of legal action stemming from defective or faulty products.
This depends; coding mistakes and software errors may cause a business' operations to be affected—in which case you should have a professional liability/errors and omissions insurance policy; whereas product liability protects you against a customer who experienced physical harm because of your product. An example of this would be an exploding battery or faulty wiring leading to electrical shock.
How much coverage you decide to buy depends on:
Typically, the more output the greater likelihood one of the products you make or sell will be defective. As your small business grows, you may have to adjust your policy for your changing needs.
If your business produces or sells products to customers, there is a chance your product could have a defect that causes injuries or damages a third-party's property. Without a proper product liability insurance policy, you'll be forced to pay out-of-pocket for:
The only coverage provided by a product liability policy is for property damages or bodily injuries to a third-party caused by a product you sell or manufacture. Anything else, such as slip-and-fall injuries, financial loss from professional advice, or damage to your business itself, are covered with different insurance policies including general liability, professional liability and commercial property coverage.