A guide to product liability insurance
What is product liability insurance?
Product liability insurance protects your business, from customer claims for injury or damage caused by your product.
Whatever role your business plays in the product life cycle - you could be liable for claims against a product you’ve supplied your consumers - even if you technically didn’t cause the issue. So, whether you are a manufacturer, supplier or retailer, you’ll want to think about safeguarding your business with product liability cover.
Public vs. Product liability insurance – what is the difference and which do you need?
While both product and public liability insurance are designed to secure your business against injury or damage claims made by consumers and/or members of the public, each type of cover serves a slightly different purpose.
Public liability insurance protects you from claims made by a member of the public, in relation to incidents that occur at your business or as a result of your business carrying out work, while product liability insurance covers you from claims against the products you have supplied to your consumers.
Which form of liability insurance or whether you need both public and product liability insurance is dependent on the type of business you have.
Ask yourself: Is my business customer facing or conducted in a public place?
If the answer is yes, you will need public liability insurance.
Ask yourself: Is my business part of the product to consumer supply chain?
- If the answer is yes, you will need product liability insurance.
- If the answer to both the above is yes, it is likely that you will need public and product liability insurance in order to protect your business.
Is product liability insurance compulsory by law?
Product liability isn’t compulsory under UK law. However, even if your products do follow legal safety requirements sometimes things go wrong, and if you are found responsible for damage, injury or death caused by your products, you could be sued.
You may also find that while not compulsory by law, product liability insurance is a mandatory requirement made by many of the manufacturers, suppliers, distributors and/or retailers you want to or do work with.
So, while not a legal necessity, product liability insurance provides an important safeguard for your business and enables you to operate better within the supply chain.
What does product liability insurance cover?
Product liability insurance covers the costs of a compensation case brought against your business for damage or injury caused to a consumer by a product itself. This can include any legal fees you or they incur as well as the compensation paid out to the consumer.
Even the smallest design or manufacturing fault could lead to a costly claim against you - in some cases whether or not you directly manufactured the product - therefore product liability insurance is key to protecting your business.
Who is liable for damage or injury caused by a product?
If your business manufactures the product that has caused damage or injury to a consumer you are more likely to be solely liable for the compensation cost. However, whatever part in the supply chain your business plays, you could still be liable for part or all of this cost.
- If the product is branded with your name
- You have been involved in repairing the product
- The manufacturer can’t be traced or has gone out of business
- The manufacturer is located outside the EU
How much does product liability insurance cost?
The cost of product liability will depend on the cover you choose. Product liability insurance with Superscript starts at £35 per month.
Identifying the risks your business faces will help you to decide the best level of cover to protect you from potential claims against your business in relation to the products you make, supply or distribute. 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.
It can help to start by identifying each risk your business faces, and then asking yourself four high-level questions:
Your business is a health and beauty product manufacturer.
- Risk: Product creates an allergic reaction in a client.
- What insurance is needed to cover this risk? Product liability insurance.
- How likely is this to happen to my business? I’ve experienced this X times in the past two years.
- How much would this risk cost my business in lost revenue? Last time this happened, it cost my business over £x in customer compensation and legal fees.
- How much would cover for this risk cost? Product liability cover with Superscript starts at £35 per month.
- How much would it cost to make a claim?
Based on this simple assessment, you may decide that the cost of product liability insurance is worth it for a risk that could potentially cost your business thousands of pounds.
While product liability insurance may be important to your business, it’s important to ensure your insurance covers any and all potential risks to you and your employees. Find out more about how to get the right combination of business insurance covers to protect your business.