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Product Liability Insurance: All You Need to Know
Apr 5, 2021

Product Liability Insurance

Doing any business involves risks. In some situations, these risks could also realise in to losses. As a business owner, you need to take the complete responsibility and accountability for every product you make and sell. Business owners, manufacturers, and traders can easily fall into the trap of lawsuits because of the product that they sell. Accordingly, in order to cover the costs that can arise out of such situations, a liability insurance can be a safety net for you and your business.   To help you understand it better, here is a brief overview of product liability insurance -   What is product liability insurance? Product liability comes in to picture when a customer buys your product, and that product causes a bodily injury or property damage to them. If that damage or injury is a result of a fault in your then you can be held accountable for the same. So, a product liability insurance can help you navigate through the losses due to this cost and cover for them.   What all is covered under a product liability insurance? Some common product liability claims include products which lead to physical harm to the customer, products that damage property in any way, or illness caused due to food or beverages. It can usually happen if there is a design or manufacturing defect in the product or a marketing fault such as incorrect labelling or lack of safety warnings. Product liability insurance covers claims arising from all such situations.   What are the exclusions of product liability insurance? Any quality or performance issues in the product due to it being defective is not covered under this type of commercial insurance. Further, any deliberate wrongdoing by the user resulting in a claim does not come under the purview of this policy. Also, product recalls, losses to the owner arising due to the recall and accidents caused due to negligence of usage guidelines are excluded.   Who can avail this insurance?  Product manufacturers, retailers or distributors are eligible to avail this insurance policy. You might think that if you are a small business owner, you don’t need this policy, but not only are you eligible for it, you could benefit immensely from it.   What are the key features of product liability insurance?  Here are some key features of the same that you must know about -  
  • It acts as a cover
With the help of product liability insurance, you can cover any legal liabilities due to damage or injury to third-party that resulted from a product sold by your business.  
  • Can be used as an add-on feature
Another benefit of this insurance policy is that it can be extended to cover vendors, in the form of an add-on cover called Limited Vendor’s Liability. It will provide a cover for you if a liability arises from the sale or distribution of the insured product by either named or unnamed vendor.  
  • Indemnity limit 
‘Limit of Indemnity’ stands for the sum assured under the product liability policy. There are two limits set for each accident that can occur during the course of the policy - Any One Accident (AOA) Limit, and Any One Year (AOY) Limit.   Thus, irrespective of the volume of your business, it is recommended to have a product liability cover. It can not only save you from legal hassles but also avoid any financial set-backs to your business growth.

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