One type of business insurance that is often necessary is product liability insurance. Below, we will discuss this type of insurance and help you decide if it may be right for you.
What Is Product Liability Insurance?
Product liability insurance covers you and your business in the event someone sues you for problems relating to a product your business interacts with. That is, if your business designs, produces, alters, and/or sells a product, there is the potential that someone or some entity may sue your business over that product for causing property damage and/or personal injury.
Here’s an example:
Let’s say your business manufactures and sells curling irons. Naturally, these irons get quite hot in order to function properly. A buyer of one of your curling irons burns themselves severely on the arm when using your product. As a result, they sue your company for their severe burns.
In this case, if your company had product liability insurance, the coverage would protect you by paying for the cost of defending the customer claim.
What Exactly Does Product Liability Insurance Cover?
It’s important to note that claimants (those suing) can only win a product liability lawsuit if they can prove that your product is defective in some way.
There are three types of defects that product liability insurance will provide coverage for:
- Design defects
- Marketing defects
- Manufacturing defects
The insurance will pay for the legal fees associated with these claims or any payouts that you may be liable to pay if you lose a case. Of course, you’ll need to have an adequate amount of coverage in order to cover all these costs.
- Product liability insurance does not cover:
- Product recall costs
- Professional negligence
- Slips and falls
- Lost inventory
- Worker injuries
Does Your Business Require Product Liability Insurance?
Any business who is part of the design, production (manufacture), alteration, or sale of products — no matter what type — should have product liability insurance. The amount of coverage you need may depend on exactly what the product is and how involved with it your company is (for example, whether you design, manufacture, and sell the product or just sell the product).
The very best way to know for sure if your company should have product liability insurance is to speak with a business insurance agency and explain what role your business has.
Also Read: Do I need Business Insurance To Start A Company