Despite all your best efforts, there’s always a chance for unforeseen product errors that can occur. There are inherent risks involved for any product, so product liability insurance is a must. Typically, product liability coverage might be included in a general liability policy, but it can be purchased in conjunction with general liability or on a stand-alone basis.
What Is Product Liability Insurance?
Product liability insurance policies help protect your business from claims that a product your business sold or made caused bodily injury or property damage to a consumer or another third party. This policy aims to cover legal expenses from a resulting lawsuit or claim.
An issue with a product can arise at any stage of production and have the potential to lead to defects. The responsible party could include manufacturers, distributors, importers, product retailers, and wholesalers. A defect could be the result of:
- Design flaws – an issue that exists before the product was produced
- Product defects – a problem that occurs during the manufacturing process
- Inadequate instructions – occurs when the product is sold and used
Consumers can be harmed by how a product is manufactured, designed, marketed, or misused. Even when a product is used incorrectly, the business could still be held liable as the responsible party.
What Does Product Liability Insurance Cover?
Without this coverage, your business is responsible for paying for any of these damages out of pocket. Most small to mid-sized companies cannot afford these payments or reparations, and one costly lawsuit could be detrimental to your business.
Product liability insurance covers:
- Legal costs
- Medical costs to the injured party
- Reward for loss wages
- Pain and suffering
- Other compensatory and business damages
- Settlement fees
There are some instances where product liability insurance does not cover costs: recalls, inventory losses, employee injuries, and customer injury on business property.
How Much Does Product Liability Insurance Cost?
As with any insurance policy, there are several factors to consider when determining the costs. The typical cost components for any type of coverage are location, claims history, policy & coverage limits, and industry. These same components are taken into consideration for product liability insurance premium costs.
But for product liability insurance, there are some unique variables to examine:
- Type of product
- Volume of sales
- Number of parties involved
- Position in supply chain
- Annual revenue
Industries with a higher likelihood of product failure (industrial equipment, heavy machinery) and if a product might cause widespread harm (pharmaceuticals, consumer goods) will face higher insurance premiums.
Get Coverage With Biscayne Risk
While general liability insurance is essential for every business, those facing higher risks need to consider product liability insurance. No one anticipates a lawsuit, but product liability insurance covers some unforeseen legal costs that can happen at any time.
With Biscayne Risk & Insurance Group, we can assess your business’s risks and recommend the right insurance coverage to meet all your needs. We ensure our clients get comprehensive coverage to protect their businesses and employees. Contact us today to see if your business could benefit from product liability insurance.