What Is Product Liability Insurance?

Product liability is all about ensuring quality goods that consumers can buy. Without product liability laws, a developer could simply pretend to research a product that could never work. Subsequently, a manufacturer could pretend to make a product that doesn’t work. Product liability also protects the consumer against product defection or dangers from defective goods. Product liability can also extend to “goods” such as gasoline, pets, or written charts.

Despite the best intentions, products sometimes fail. Perhaps the testing process didn’t find out about a faulty wire that can cause a fire. That’s why most businesses opt to buy product liability insurance, which covers businesses from lawsuits resulting from personal injury related to defective products.

Customers will receive damages from injuries sustained from the defective product: Medical costs, legal fees, and punitive damages. When faulty gasoline is used, it can destroy parts of a vehicle, leading to high fees. Combine that with injury, and you have an expensive case! Sometimes, a case will even award damages for pain and emotional trauma.

The insurance is especially important due to the climbing number of product liability cases in the United States — and the climbing price tag on those cases. Lawyers charge more too.

The type and amount of insurance purchases in a plan depends on a number of factors. How large is your business? How many products does the business sell? Have your marketed products ever resulted in a previous personal injury case? These are questions an insurance provider will need answered before you receive a quote. Other factors include the type of business, its location, and policy limitations.

Most plans cover design defects, manufacturing defects, strict liability (a customer is injured but not due to negligence), and improper warning (a customer is injured because the warning labels on the product were insufficient). 

Not sure if you need product liability insurance? The vast majority of businesses could benefit, including manufacturers, retailers, and wholesalers or distributors.