Even though small businesses work hard to produce high-quality products, it is possible that some of them will not work as intended. A children’s clothing company may produce clothing that is too tight and could pose a suffocation risk, or a bakery could use an ingredient in pastries that causes allergic reactions.
It is possible that defects can cause bodily harm or property damage. These are serious risks your business and customers cannot afford. All businesses that sell products need product liability insurance. Learn what product liability is and how much coverage your small business may need.
What is Product Liability Insurance (PLI)?
Product liability insurance protects your business against claims that the product you manufactured or sold has caused bodily harm or property damage.1 Some insurance companies offer this coverage separately, but we bundle it with your general liability policy.
Your business may be liable for general liability claims arising from product defects if you do not have product liability insurance.
Who needs product liability insurance?
This insurance is useful if you are a business that sells products to clients or customers, or has a supply-chain. This coverage is beneficial to many businesses, whether they are small or large.
- Wholesale and distribution businesses
A problem at any stage in the production process can cause defects, which can expose your business to a product liability lawsuit. It’s crucial to protect your business by choosing the right insurance.
What is the product liability policy?
It is not just a guarantee or warranty for the product. The insurance protects companies from the consequences that may arise if a product injures or damages third parties.
A product’s design, marketing, or manufacturing can cause harm to consumers. Your business may be responsible for damages even if the product is misused.
It is your business’s responsibility to make things right. In the event of a lawsuit, product liability insurance will protect your business. In 2014 there were 58 496 personal injury/product cases, a 20% rise from 2013. In 2012, a law firm reported that the average jury verdict in product liability cases was $3,439 035 with a median award of $1,503,339.20. Product liability insurance is becoming more and more important to small businesses due to the increase in lawsuits and high costs.
A product liability lawsuit can be a stressful and expensive experience. The insurance will cover the legal costs that would otherwise cause major hardship. The insurance also covers business and compensatory damages, as well as medical costs.
How much product liability coverage does your small company need?
The amount of coverage you need depends on the products and sales volume, as well as the parties involved in the production. The more products you produce, the higher the chance that one product will have a defect. This could be a growing concern as your small business grows.
Even if you play a minor role in manufacturing, sales, or distribution, product liability insurance is still a necessity. Speak to an agent to ensure you are covered.