What is Product Liability Insurance?

Businesses that produce, sell or transport products can be exposed to risks long after product leave their facilities. If a product were ever to cause significant physical damage or bodily injury, the affected party might file a claim or lawsuit for financial compensation. Product liability insurance policies help protect businesses from many of the product-related risks that they’re exposed to.

Product liability insurance is a specialized form of liability coverage. As a liability protection, policies normally help pay legal fees, settlements and judgements arising from covered claims.

These liability policies don’t normally cover products themselves against theft, damage or loss. Those kinds of protections are typically acquired through an appropriate commercial property policy.

What Types of Claims Do Product Liability Policies Cover?

As is the case with most insurance policies, the exact claims that a specific product liability policy covers are determined by that policy’s terms, conditions and exclusions. There are, however, some common claims that many product liability policies offer at least some protection against. Some of the more common claims are those arising from:

  • Production and manufacturing flaws
  • Design defects
  • Warning deficiencies
  • Instruction manual errors

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What Businesses Need Product Liability Coverage?

When a product causes significant damage or injury, almost any business along that product’s supply chain may be named in a liability suite. Therefore, many businesses can benefit from the protections that product liability policies offer.

Manufacturers, wholesalers, retailers, transporters and product design consultants can all be accused and need protection. Even refurbishers and repair businesses may want coverage for the work they do.

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Is Product Liability Coverage Included in General Liability Policies?

Some general liability policies may provide product liability coverage, but not all do. Additionally, those that do offer product liability coverage frequently only afford a basic level of protection.

In many cases, businesses are better protected by supplementing any product-specific protection that a general liability policy does have with a product liability policy. An insurance agent who’s familiar with both types of coverage can help business owners determine what is the best coverage solution for their business’ situation.

What Factors Affect How Much Product Liability Policies Cost?

Insurance companies base product liability premiums on many different factors. Some of the items that an insurer might take into consideration include the:

  • Number of products
  • Intended purpose of the products
  • Customers who use the products
  • Materials the products are made from
  • Warnings and instructions included with the products
  • Claims history of the business seeking insurance

Since there are so many factors and they can vary a lot, the cost of product liability coverage can likewise vary. Most of the time, though, having a policy in place is much less expensive than facing a major product-related lawsuit without adequate protection. The average product liability claim costs businesses $35,000.

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How Can Businesses Purchase Product Liability Insurance?

Product liability coverage may be acquired as a stand-alone policy or through a package policy that comes with other coverages as well. Both business owners policies, which are generally basic package policies, and commercial package policies, which tend to offer more coverage and options, may include product liability coverage as an option.

For help sorting through the various product liability insurance options and finding coverage that meets your business’ specific needs, contact the independent insurance agents at World Insurance Associates. Our agents are able to get quotes for stand-alone product liability policies and package policies that offer the coverage, and they have the expertise needed to help you determine which offers the most appropriate level of protection for your business.

Meet Your Industry Specialist

Jeff Kroeger

Principal, Senior Vice President, and Head of Commercial Lines, Mr. Kroeger also manages the company's hospitality book of business and is that unit's primary producer. He is a graduate of Montclair State University and was named a 2015 Young Gun Insurance Business America.

Jeff has been providing exceptional insurance for restaurants, bars, nightclubs, and more for many years. He understands the unique challenges this industry faces and delivers the right coverage at an affordable price.

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