What is Product Liability Insurance?
Product liability insurance is a form of insurance that will protect your business if it designs, produces, or sells a physical product that is then given to customers (whether sold or offered as complementary). It’ll cover you if your product causes property damage or personal injury, taking care of the costs of your legal defence and any compensation a court may award against you.
Even if you do not manufacture the product yourself, you may still be found liable for any issues caused by them in a few different circumstances, such as:
- Your business logo being on the product/packaging
- Your business repaired/changed a product before sale
- The product was imported from outside EU trade zones
- You cannot give the name/details of the original manufacturer
- The original manufacturer is no longer in business
The circumstances by which a business might be held responsible for a product they didn’t manufacture themselves are outlined in the Consumer Protection Act 1987. As a result, your business must consider its responsibility to its customers with each product it sells on – if you rebrand it as your own, repair or modify it or bring it in from outside the EU, the legal responsibility may lie with you, so it’s important to be properly insured.
While product liability can take care of a lot of the accidental issues your design/manufacturing may cause, keep in mind that it won’t cover you if the product was produced incorrectly (poor workmanship), nor will it cover any longer-term financial losses a business incurs as a result of the faulty product.
Product liability will usually cover you up to three years after using the product, but this can be longer in some cases. As with similar forms of coverage like public liability, there are usually upper limits to how much the insurance will payout, so if you feel you’re potentially liable for more than you’re covered for (or a client insists you hold a higher level of coverage) then talk to your insurer to see if you can arrange a larger amount of cover.
In terms of purchasing your product liability, it shouldn’t be any more complicated than setting up other policies you may have in places, such as public liability or employers’ liability. You may even find that your insurer offered to package your public liability and product liability together. This is a great chance to find a good price, too, as it isn’t too hard to find the package of both for considerably less than the cost of the two separately.
What does product liability insurance cover?
A typical product liability insurance policy is designed to cover liability costs for injury or property damage to a customer/client that occurs during the period of insurance coverage that comes about as a result of a product you’ve designed, manufactured, repaired/altered or sold.
It’ll cover you for any legal costs you incur as a result of your legal defence during a product liability claim – even if you’re not found liable at the end of the case. If you are, then you’ll also be covered for any compensation/expense a court awards against you. Given how expensive these cases can be, product liability is a worthwhile investment if you feel your business could be at risk if someone made a claim.
Does product liability insurance cover design?
Yes, product liability will cover you for any property damage or injuries caused by a product your business designed. This makes it essential for anybody who draws designs or blueprints or makes recommendations on the best materials to use during a manufacturing process.
Even if you don’t manufacture the product yourself, if the issue was in your design and not an error of the manufacturing process, then you could still be found liable. In this situation, it’s absolutely best to play it safe and take out a policy just if something goes wrong.
Keep in mind that you can still be found liable even after the initial sale of the product, say if something goes wrong many years down the road, which is why many insurers offer to maintain your policy even if your business closes (usually for a one-off fee). It is difficult to see why having a product liability policy can be such valuable protection for your business.
What is the cost of product liability insurance?
Product liability insurance policies usually start from around £6-£7 per month (£72-£84 annually). This is at the lower end of the market, where insurers probably don’t feel there is a great deal of risk, so if you work in an industry (or operate a large business) where the cost of something going wrong would be significantly higher, then don’t be surprised if your quotes come out as more expensive.
You may also find that your product liability insurance doesn’t cost you anything at all. This is because many insurers will include it as complementary when you sign up for a public liability policy through them. If you are looking to save, this can be a great way to do so, but make sure you check through the terms and conditions, so you’re clear on what (and how much) you’re covered for with it.