Product Liability Coverage and How It Could Help Protect Your Product Business


Product liability is not a joke. There are very real risks that should be considered if you manufacture a product, are a product distributor or just sell products.

Coverage such as product liability insurance for small businesses is what helps to protect a product-based business in the event of claims that may arise from the manufacturing or sale of products.

It generally involves coverage for a manufacturer against any loss that might be incurred, or any injury sustained by a buyer as a result of a product flaw, malfunction, or failure to provide adequate warning.

The claims typically faced by companies can broadly be divided into three categories

  • The first category includes claims relating to manufacturing or production flaws. These are claims that defects found products have originated from their manufacturing process.
  • The second category has to do with design defects that cause products to be unsafe for use by mere virtue of their design.
  • The third category involves claims that arise when adequate safety instructions do not accompany the products concerned. These safety instructions are often referred to as defective warnings or instructions.

Although all these claims primarily affect manufacturers, retailers can equally be held liable. This means that any business that is in any way, involved in the packaging, design, or distribution of products to the final consumer, should have product liability coverage.

The premium to be paid is often determined by the type of product and the volume of sales. It is important; therefore, that accurate information is provided to the insurance company to ensure proper assessment of the risks involved.

Some might deem it fit to cut corners, and inflate or deflate figures to score lower premiums; however, this can prove to be quite dangerous in the event where there is a need to lay claim to product liability indemnification. Some products attract more premiums than others because of the higher risks involved in their usage.

Therefore, there is no fixed rate since premiums are based on specific products. It is advisable for you to consult insurance brokers to get an even clearer picture.