Defective products can cause accidents and injuries, leading to lawsuits and financial losses. Product liability insurance can help protect businesses that manufacture, distribute, and sell goods, providing coverage for third-party bodily injury, property damage, and legal fees. We’ve evaluated the best product liability insurance providers based on coverage, financial stability, customer satisfaction, and overall quality.
Coverwallet began its journey in New York City in 2015 operating under the
Aon Insurance banner. At Coverwallet, you can access everything you need to
keep your company well-protected at an unbeatable price.
With a 100-year history of insuring businesses, Hiscox is well-known across
America and globally. With more than 500,000 small business customers,
Hiscox is fully aware and trained in the unique risks a business can face.
Thimble provides business insurance that can be tailored to your business by
the year, month, day, or even the job. At Thimble, the process to getting
the right business insurance is simple, scalable, and flexible.
A product you sell could be defective in how it was manufactured, designed, or sold. Product liability insurance can help cover your legal expenses if a product causes personal injury or damage to a buyer or a third party. Â
Who needs product liability insurance?
Businesses that sell any type of product are at risk of a defective product causing harm or damage to a consumer. For instance, a supermarket could sell food that makes its customers sick, or an electronic store could sell a device that causes a fire.Â
While some coverage for product liability can be included in general liability insurance, businesses that face more extensive risks could benefit from taking out a standalone policy.
Types of businesses that should consider taking out coverage include (but are not limited to):
Manufacturers
Distributors
Wholesalers
Retailers
Installation businesses
eCommerce businesses
What does product liability insurance cover and exclude?
Product liability insurance can help protect your business against legal costs due to defective products. E-commerce businesses, sellers on Amazon or eBay, restaurants, retail stores, construction firms, and traditional brick-and-mortar businesses, could benefit from coverage.Â
It’s worth noting that even if you have provided all the necessary instructions and there are no design or manufacturing issues with the product, if a consumer misuses a product, your business could be held liable for damages.Â
Product liability insurance coverage can include:
Design defects:Â Errors and defects due to the design of the product.Â
Manufacturing defects:Â Problems due to the manufacturing process of the product.
Improper warnings or instructions:Â Incorrect or insufficient instructions given to the customer regarding proper usage.Â
Product liability insurance coverage can help pay for legal fees, settlements, medical expenses of the injured party, wrongful death, and property damage.Â
Generally, product liability is made for physical products. It does not cover software or other tech products. However, product liability may cover this incident if a software causes property damage or physical harm.
Exclusions for product liability insurance typically include product recalls, customer data breaches, employee injuries, and third-party injuries on business premises.
It may be possible to buy an endorsement with your insurer for product recall insurance to cover product recalls.Â
What are the limits of product liability insurance?
When you take out a product liability insurance policy, the limits will determine the maximum amount you can claim during a policy period. Limits will differ depending on your business size, product range, and volume of sales. The more products your business manufactures, distributes, or sells, the higher the risk, and therefore your business will require higher limits.
Limits can average $1 million to $2 million but can go even higher based on your business activity.
When considering a product liability insurance policy, it is important to distinguish between per occurrence limits and aggregate limits. Policies with a per-occurrence limit have a maximum amount you can claim per policy period for a single incident. An aggregate limit covers you for a maximum payout for multiple claims per policy period.
How much does product liability insurance cost?
Several factors go into the calculation of product liability insurance, and policy premiums can vary between insurers. On average, businesses can expect to pay $1,200 a year, but this can depend on several factors.
Here are some factors that insurers will consider when providing a quote:
Type of product: Products with safety hazards are considered riskier. If products are flammable or could easily cause injury, this could impact your product liability insurance premium. Insurers will need to factor in the risk of a consumer getting injured whether a product is defective or not defective. Â
Sales volume: If you have a high sales volume, the risk of a defective product increases, which will be reflected in a higher premium.Â
Coverage limits: Businesses that require more extensive coverage limits due to a higher sales volume or riskier products can pay a higher premium.Â
Industry: Certain industries are considered riskier than others, and this will be factored into your insurance policy.Â
Claims history:Â If you have a history of defective products and a high number of claims, this will affect your premium.Â
Deductibles:Â The lower your deductibles, the higher the insurance premium.Â
Business experience: Businesses that are new to manufacturing a product are likely to make more mistakes than experienced businesses. This can increase the insurance premium.Â
Location:Â Insurers can factor in geographic locations to your insurance policy and limit claims to certain areas. This will be reflected in the premium.Â
How to choose the best product liability insurance
When looking for the best product liability insurance policy, here are some key factors to consider before you make a purchase:
Compare multiple providers: The best way to find a product liability insurance policy that best fits your business needs is to compare quotes from multiple providers.Â
Coverage region: Insurers can limit coverage to certain territories. For instance, coverage may not be included if a product is sold outside of the US. Check your policy wording, and if in doubt, speak to your insurer if you require worldwide coverage.Â
Bundle policies: You may have the option of combining your product liability insurance policy with a business owner’s policy. That can add significant savings to your insurance premium.Â
Umbrella policies: Businesses with a higher sales volume could benefit from umbrella policies where the insurer provides liability coverage exceeding the original policy limits. This can boost coverage limits and provide a second layer of protection for your business. Â
Check general liability insurance coverage: Many general liability insurance policies can include product liability insurance coverage. Before you take out a separate policy, it’s worth verifying what is covered and not covered under your current general liability policy.Â
