What Does Product Liability Insurance Cover?

Product liability insurance, for the most part, covers claims involving a product’s manufacturing defects, design defects, and marketing defects. Manufacturing defects would involve any “mistakes” made when a product was manufactured that could cause harm to customers while design defects involve actual mistakes made when a product was designed that could harm customers.

A mistake in design simply means failure to properly design a safe product. Manufacturing defects typically involve low-quality materials or poor workmanship during the physical manufacturing process. The best way to avoid this would be to choose a reliable company to manufacture your product, but even reliable companies can make mistakes, which is why it’s important to have product liability insurance.

Marketing defects generally refer to cases where businesses fail to properly label their products. One example of a marketing defect would be if a toy company failed to put a warning label on their product stating something like “Warning: Small children should be supervised when playing with this product, as small pieces can be a choking hazard”.

Buy Product Liability Insurance Businesses

That directly sell products to customers can purchase numerous kinds of product liability insurance. Depending on what kinds of protection a business wants, a policy’s premium could vary greatly.

A small business with only a handful of products may pay a much smaller premium than a large toy company with thousands of products. A large biopharmaceutical company that just released a new drug may have to pay tens of thousands a month in premiums, as if that drug proves to be dangerous, the insurance company would be on the hook for potentially billions in damages.

Remember when Merck’s Vioxx drug was pulled off of the market? Merck had to pay billions of dollars to settle with customers – no insurance company wants to be on the hook for that kind of money. Restaurants, on the other hand, won’t have to pay very high premiums to get reasonable coverage, as simple cases involving food poisoning (which are rare) can usually be settled for under $10,000. Businesses are encouraged to shop around to find the best product liability insurance policy.

For the small business owner

The small business owner must also consider the premiums for a product liability policy. The cost will be based upon the type of product, the volume of sales, and the role the small business owner plays in the process. The cost for such coverage is not outlined in stone. You should do some research online to find the average cost of such insurance for your particular state. Fortunately, the small business owner has several different liability carriers to choose from. Competition for this type of coverage is strong and the small business owner should shop it out amongst the different insurance companies. While the chances are small that a small business owner will ever face a product liability claim, it only takes one case that could exhaust the financial resources of the small business owner. Through the purchase of a product liability policy, the small business owner can transfer his risk onto the insurance carrier, and avoid potential ruin.

How Much Does liability insurance Cost?

It is not a big problem, the answer is just one click away, there are many sites there to make it simple. for example howmuch.net.

Policy costs vary depending upon the product’s risk profile and annual sales revenues. Product categories have classification codes. The rates per $1000 of sales vary according to underwriting data collected on each class of product and the individual loss history of the applicant. Businesses that sell low-risk products can normally find coverage in the standard market. Businesses that sell high-risk products must often resort to coverage in the nonstandard or excess and surplus lines market. Rates, minimum premiums, and coverage terms are typically superior in the standard market.

Start-up businesses selling higher-risk products may find that coverage is difficult to obtain or expensive. However, there are a number of insurance brokers and carriers specializing in this niche. Minimum premiums for General Liability or stand-alone Products Liability can range from $3000 to $25,000, depending on the risk profile of the products.

Think twice when buying  Insurance

Always make sure to check before closing on a deal that seems better than can be expected! Insurance companies consider a wide range of factors when looking towards insuring a company. From where the business is located to how many items are sold, the price is affected by every detail. Companies can work at keeping their liability costs low by making quality products so there are fewer suits and bundling their liability insurance with other insurances at the same company, but most of the other factors are determined based on what business you are trying to run.

 

The information on this site is a general summary. Please refer to the actual policy for exact terms and conditions

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Product liability insurance

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