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What is Product Liability Insurance?

October 05, 2023

Product liability insurance covers the cost of compensating anyone who has been injured or had their property damaged by a faulty product that your business designs, manufactures or supplies. If you do need legal assistance, it can also cover the legal costs you incur.

Product liability insurance is often part of a package product with public liability insurance. Below, we answer "what is product liability insurance?" and the key questions surrounding this topic, to help you decide whether it's right for you and your business.

What Does Product Liability Cover?

Product liability insurance can cover you if you’re held responsible for your product causing harm. It can cover you for:

  • Compensation costs for personal injuries caused by your faulty product.
  • Compensation costs for loss of or damage to property caused by your faulty product.
  • Compensation costs for unforeseeable circumstances such as product faults that your quality control system could not identify.
  • Legal fees and legal expenses.
  • Legal defence costs.

Do I Need Product Liability Insurance?

No matter how carefully you’ve tested your products, or even if you have good quality control practices, there could still be dangerous effects that can unknowingly appear. Product liability insurance can provide comprehensive protection for design flaws that could be potentially dangerous for users.

For a small business, paying compensation costs could be crippling, so it's a good idea to have product liability insurance in place to help cover the costs.

Is Product Liability Insurance a Legal Requirement?

No. However, if your business designs, manufactures or supplies a physical product that is sold or given away for free, you should consider product liability cover.

How Much Product Liability Insurance do I Need?

The level of cover you need is related to the level of risk your business faces and every business is different. Cover can be anywhere from £1 million to over £10 million. Our experts are always happy to talk you through your options, so why not give us a call to discuss.

What Isn’t Covered by Product Liability Insurance?

Product liability insurance may not cover you if you have a faulty or defective product because of bad workmanship. It typically doesn't cover financial losses to your business caused by your faulty products. Product liability insurance also doesn’t cover the costs you incur to repair, rectify or recall products.

If you don’t provide adequate safety instructions, your product may be classed as unreasonably safe. If someone does get injured by your product, you could find yourself with a lawsuit against you.

Employers Liability Insurance

Product liability insurance also doesn’t cover compensation or legal fees from claims made by employees who are injured or become ill as a result of working for you. Employers liability insurance would provide cover in this scenario and is a legal requirement if you have employees.

How Much Does Product Liability Insurance for a Small Business Cost?

Again this depends on your individual circumstances – an insurer will consider your industry, revenue, claims history and policy limits. There’s a lot to consider and that’s why it’s usually best to speak to a specialist adviser. Often a ‘one-size-fits-all’ policy that you may find on a comparison website, won’t meet your requirements.

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