Product Liability Insurance: What It Covers and How to Get It

Most likely, no business wants to cause harm to its customers. However, it's possible that a product you sell can cause injury, and your business will be sued for it, even if you didn’t manufacture the product directly. If an individual can prove that you knew a problem existed with the product but did nothing to fix it, you can be held liable. This is known as negligence and could spell big legal trouble for your business. To deal with these situations appropriately, consider getting product liability insurance.

A local independent insurance agent can help your business get set up with all the product liability insurance it needs. They'll assess your business's unique operations and products to find the ideal policy and amount of coverage. But first, here's a closer look at product liability insurance, what it is, and how to get it.

What Is Product Liability Insurance?

Product liability insurance is a special form of business insurance coverage that can reimburse your company for expenses and lawsuits arising from third-party claims of injury or property damage caused by your products. The product that caused harm to a third party could have been manufactured or simply sold by your business. 

Though product liability insurance is sometimes sold separately, you can also often find it included with general liability insurance. Without this coverage, your business could have to pay potentially hefty lawsuit costs and other expenses out of its own pocket after an unexpected incident.

Who Needs Product Liability Insurance?

Whether you manufacture your own products or simply sell products to the general public, having product liability insurance can help protect your business against potential disasters. Especially if your business is in one of the following industries, this coverage may be right for you:

Even if your business doesn't fall into one of these niches, it may still benefit from having product liability insurance. An independent insurance agent can help you determine if your specific company needs product liability insurance.

What Does Product Liability Insurance Cover?

Product liability insurance can protect your business against several forms of financial losses. These include:

• Attorney, court, and defense costs in a lawsuit
• Judgments or settlements your business is ordered to pay in a lawsuit
• Medical treatments for injured or ill customers harmed by your products

Not only can product liability insurance cover an affected third party's medical bills, but it can also reimburse your business for all legal costs stemming from resulting lawsuits if the customer sues you.

Types of Claims Covered by Product Liability Insurance

Several types of product claims can result in lawsuits against your business. The following claims can be covered by product liability insurance:

• Manufacturing or production flaws: If the way you produce a product results in an unsafe product, you can be held responsible.
• Defects in design: If the way your product is designed causes harm to a consumer, whether you manufactured the product or simply sold it, you could be held responsible for damage or injury.
• Defective warnings or instructions: If your product is labeled improperly (i.e., leaves off warnings or contains unclear instructions), and the use of the product results in injury, you could be held responsible.
• Strict liability: If a customer suffers harm caused by a manufacturer's product, your business could still have to pay to defend itself in court, even if you're not found to be negligent.

If your business manufactures, sells, or distributes products to third parties, look into getting product liability insurance to protect against potentially devastating losses from multiple types of claims.

What's Not Covered by Product Liability Insurance?

Product liability insurance can't cover everything. These policies tend to exclude the following:

• Employee injuries and illnesses
• Customer injuries and property damage caused by the business premises
• Lost inventory
• Recalled products

Your business can protect against costs associated with worker injuries and illnesses with workers compensation insurance. For customer injuries or property damage caused by the business premises, a general liability or premises liability insurance policy can help. Finally, for product recall incidents, look into product recall insurance. 

How Much Does Product Liability Insurance Cost?

The cost of product liability insurance can depend on a number of different factors. These often include:

• Your business's location
• Your business's industry and operations
• Your business's specific products
• Your business's prior claims history
• Your business's annual revenue
• The coverage options and limits chosen

Small businesses tend to pay an average of $1,200 per year for product liability insurance. Work together with an independent insurance agent to find the most affordable product liability insurance near you.

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An Independent Insurance Agent Can Help You Get Product Liability Insurance

The best way to get product liability insurance is to contact an independent insurance agent. These agents have access to multiple insurance companies and policies, so they can shop and compare quotes for you. 

They can provide a range of options to help you find the policy that best suits your coverage needs. And down the road, your agent can help you update your policy as your business's needs evolve.