Product liability insurance is a vital safeguard for your business against claims arising from injuries or property damage caused by the products you manufacture, sell, or distribute. While some insurers offer this coverage as a separate policy, it is typically included within your general liability insurance package.
Without product liability insurance, your business may face significant out-of-pocket expenses for various liability claims stemming from product defects.
The Significance of Product Liability Insurance for Small Enterprises
If your business is involved in the creation, sale, or distribution of products, acquiring this insurance is essential. Any participant in the supply chain can potentially be held responsible if a product causes harm, and the scope for filing product liability lawsuits is broad.
In instances where a product allegedly injures someone or results in financial loss, product liability insurance can assist in covering legal fees, settlements, or court judgments. This coverage is also referred to as products-completed operations coverage, where “products” pertains to the items you produce or sell, and “completed operations” refers to the finished work done by your business, such as a construction project.
Coverage Provided by Product Liability Insurance
Product liability insurance offers financial support for legal costs when a product you have manufactured, sold, or distributed leads to personal injury, property damage, or other losses. Specifically, this policy can cover:
Injuries Resulting from a Product
If a product you created or sold causes bodily harm, this insurance can cover attorney fees and any resulting settlements or court-ordered payments.
Property Damage Caused by a Product
The policy provides protection if an item you sell or produce damages a customer’s property, whether due to a defect in the product itself or errors in accompanying instructions.
Illness Related to a Product
Coverage extends to illnesses attributed to products sold or manufactured by your business, including cases like food poisoning from expired goods or allergic reactions caused by cosmetics.
Wrongful Death Due to a Product
Product liability insurance also addresses legal claims, funeral expenses, and other costs associated with fatalities linked to your products.
Who Requires Product Liability Insurance?
Product liability insurance is crucial for any business involved in the production or sale of goods, including distributors and importers. It’s important to note that this coverage is distinct from product warranties or guarantees; it specifically protects against design flaws and various liabilities associated with products and may be a requirement for certain clients and partners.
Manufacturers
They rely on this insurance to shield against risks related to manufacturing defects. For instance, if a furniture maker produces chairs with faulty screws that injure a customer, their product liability policy would cover medical expenses and legal fees.
Retailers and Distributors
These entities are also at risk and must secure product liability insurance, especially when dealing with high-risk items like pharmaceuticals. Even if they are not directly at fault, they can still be held liable for damages caused by products they sell.
Construction Professionals
General contractors and similar tradespeople need products-completed operations insurance to cover any claims related to injuries or property damage after completing their work.
Beauty Industry Professionals
Those in cosmetology should invest in product liability insurance to protect against adverse reactions from products used on clients. For example, a hair salon may need coverage if a customer suffers an allergic reaction to hair dye sold by the salon.
Food Service Providers
Restaurants require food product liability insurance to cover legal expenses arising from food-related illnesses. For example, if a customer contracts food poisoning due to spoiled food served at a restaurant, this policy would help cover legal costs associated with any resulting lawsuits.
Cannabis Businesses
As cannabis products can lead to unexpected reactions, obtaining product liability insurance is essential for these businesses. Some states even mandate this coverage for licensed cannabis operators.
Exclusions from Product Liability Insurance Coverage
While product liability insurance covers numerous risks associated with products, it does not encompass every potential claim. Notably excluded are:
Costs Related to Product Recalls
For recalling defective products, you would need separate product recall insurance.
Damages to Your Own Products
Commercial property insurance protects your business assets from theft and other losses but does not cover damage caused by your own products.
Employee Injuries
Workers’ compensation insurance would address injuries sustained by employees due to products sold or made by your company.
Business Interruption Claims
If your business faces temporary closure, business interruption insurance can help mitigate ongoing expenses until operations resume.
Cost of Product Liability Insurance
https://insurancehubz.com/next-level-insurance-workers-compensation-certificate/Product liability insurance is often bundled within general liability insurance policies. The cost of this coverage varies among business owners based on factors such as industry type, geographic location, claims history, and policy limits.
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