How much does product liability insurance cost?
Calculating your product liability cover
The cost of product liability will depend on several factors, including the level of cover you choose.
By taking a moment to identify the risks your business faces, you'll be better placed to decide the level of cover you might want.
Short-term, cheaper cover might seem like a good financial decision but it’s important to make sure you have sufficient cover in the long term for claims that could arise.
This guide takes you through the questions to ask yourself to help you decide the level of cover you might need.
What is product liability cover?
Product liability insurance is designed to cover the cost of claims made against your business if a product you’ve sold, manufactured or supplied causes injury or damage to someone or something.
Companies that make, distribute or sell physical products — from tech gadgets and cosmetics to food and drink — are the ones most likely to consider product liability cover.
How much does product liability insurance cost?
To help you decide on the level of cover you need, and therefore how much your premium will be, it can help to start by identifying each risk your business faces.
Once you understand this, you can assess the likelihood of this risk happening and then calculate how much each risk would cost you should someone make a claim.
To do this, you can ask yourself four questions:
What risks does your business face?
If your business makes, sells or distributes physical products, you could face claims from a third party if they suffer from injury or property damage as a result of the products you make, supply or distribute.
Some risk examples could be:
- A beauty product creates an allergic reaction in a client
- Some fresh packaged food that's sold to a customer causes salmonella
- A faulty TV with a loose wire gives a customer an electric shock
- A heater that your company builds malfunctions and causes a fire in a customer's house
How likely is this to happen to my business?
The next stage is to think about the probability that each risk could affect your business.
- Has this risk happened already?
- If so, how many times?
- If not, do you think it could happen?
- And if it could happen, how often?
Answering these questions should help you in determining the probability.
How much would this risk cost my business in lost revenue?
If you’ve faced instances of incidents, complaints or claims already, tally up the total cost for each risk in customer compensation and legal fees.
If nothing has happened yet, it's worth doing some research to see how much a potential risk could cost you in legal and compensation fees. This could potentially be in the thousands, if not millions. If you don't have insurance, you would be personal liable for these costs and would have to pay them out of your own pocket.
How much would cover for this risk cost?
After calculating how much a potential claim could cost, compare this to the price of an insurance premium. The price of insurance will more than likely be far less than a claim would cost, even with the addition of an excess.
This will help you decide if buying product liability insurance is worth it.
Remember, while business insurance covers a range of eventualities and circumstances, it doesn’t cover everything. Please make sure to read your policy documents carefully to understand the full details around exclusions, terms and limits of your cover.
Once you've completed a quote, you'll be able to view a summary of cover. Please always refer to your policy documents for full details around exclusions, terms and limits of your customised cover. Read our guide to understanding your policy documents.
Read on
Our insurance guides answer more of your product liability questions.
What is product liability cover?
Discover what product liability insurance is beyond the definition, including if it's compulsory for your business.
What's the difference between public liability and product liability?
Find out the key differences between these two covers and whether you need one or both of them.
What does product liability cover?
Learn what types of incidents and claims that are covered by product liability insurance.