Product Liability Insurance: How Small Businesses Benefit

You’ve worked hard to build your business, gain your customers, and reach new heights through your endeavors. Being a small business owner means being aware of the risks you face, how else you can grow, and where you can go for support and information.

Whether you design, manufacture, distribute, or sell a product, you’ll need proper insurance coverage to protect you against potential lawsuits that arise from your product’s exposure to the market. Did you know that the average personal injury claim from a product claim in 2020 was $75,000 to $1 million? Hiring a lawyer alone can average anywhere from $200-$400 an hour. Would you be able to shell out the fees yourself?

You might not be aware of the benefits of Product Liability Insurance, so we are here to explain the benefits of insuring your business and product, as well as give you better insight into what liability insurance is and where it would come into play.

What is Product Liability Insurance?

A Product Liability Insurance policy is designed to protect you against the financial fallout associated with an insurance claim that your product caused someone or something bodily harm or property damage.

Did you know that you could be sued no matter where you are on the supply chain of a product? You could be held liable or named on a claim where the product that you designed, sold, or produced caused someone or something harm. If you design a product but aren’t the distributor, you could be sued. If you did distribute the product but didn’t actually manufacture it, you could still be sued.

Often, litigators will name as many individuals as they want in a lawsuit. From the manufacturer to the retail store who sold it, you’d be sued and in danger of losing thousands.

What Are the Benefits of Product Liability Insurance?

Liability insurance can protect you from paying costly legal fees and helps you meet retail contract requirements. When you purchase insurance, you can also look into bundling your coverage to ensure you have the correct limits in place for your needs.

Protection Against Lawsuits

One of the most stressful events you could deal with as a business owner would be a lawsuit. Product Liability Insurance is designed to cover third-party claims that arise out of:

  • Design Defects – If a product has an issue with the actual design, the risk of that product causing harm later on is huge. Say you sell a skateboard that is flawed due to improper trucks on the original design. If a customer down the line uses the board and broke their leg as a result of the trucks being flawed, you could be named in a lawsuit.
  • Labeling Defect – If a product is labeled improperly and causes someone harm, you could be sued. When a company sells or distributes a product with incorrect labels, for example, if a food product doesn’t list allergens, and someone reacts negatively to the product, you’d be on the hook.

Even if you were to face a lawsuit you think you could handle on your own, you would be glad you had Product Liability Insurance to help you bear the brunt of the claim.

Meet Retail Requirements

Are you a business that is looking to expand into new retail fronts, both in-store or online? Your liability coverage can help you meet retail contract requirements that allow you to distribute and sell your products in third-party stores such as Amazon, Walmart, Target, Albertsons, Walgreens, and more.

Once you land a contract with your dream retailer, you’ll want to be sure you have the right coverage that meets their limit requirements.

Bundle Coverage

The great thing about purchasing a Product Liability Insurance policy is being able to bundle the coverage with your General, Cyber, and Excess Liability insurance. These coverages would protect you against slip-and-fall incidents, property damage, bodily injury, and data breaches such as phishing scams and malware attacks.

When choosing a company to purchase insurance from, consider the ability to add coverages to your policy. Your business may require additional insurance so be sure to speak with your agent about what the best coverage is for you.

What Is The Difference Between General and Product Liability?

When it comes to insurance, you not only have to insure your place of business but you also have to insure your products that you sell, manufacture, or design. While liability insurance for your products protects you against claims that your product caused someone or something injury or harm, General Liability Insurance (CGL) protects you against claims that arise from your business operations.

General liability protects you against the financial loss associated with slip-and-fall claims as well as other bodily injury or property damage that occurs in your place of business. If you’re renting out a building and somehow break a window or damage flooring, you could be held liable and made to pay out and fix the damage. The same would apply to someone slipping in your store–if a customer slipped and broke their arm, they could sue you and you’d be responsible.

These two coverages combine to create the best insurance option for most businesses.

How Much Is Product Liability Insurance?

The cost of a liability insurance policy for your products depends on a few factors. On your application you will be asked to provide details regarding the following:

  • Product Industry
  • Business Size
  • Annual Revenue
  • Limits Required
  • Claims History

Depending on what you sell, how much of it you’ve sold, the size of your business, and the limits you’re seeking, the cost of your insurance will vary. The average cost of a policy ranges between $800 and $3,000. Be sure to ask your agent about your quote and give as much detail as possible on your application.

Written by Erin Porteous

For the past ten years Erin Porteous enjoyed the freedom of being an independent purveyor of creative services. I specialize in crafting and producing scripts for radio and TV commercials for businesses of all sizes. Moving into the web past 2 years I've been part of LR family driven by a passion for finding simple solutions to complex problems.

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