Understanding Small Business Insurance: Product Liability Coverage

As a small business owner, you’ve likely had to learn a lot of new things. One of the trickier pieces of information to understand can be insurance.  

There’s a lot of different coverages, confusing terms, and fine print conditions you have to sort through. This sometimes causes business owners to be underinsured, over pay for a policy, or completely go without insurance—and that’s a risk you shouldn’t take.

Today Insurance Canopy is breaking down the ins and outs of small business product liability insurance so you can be better informed about the coverage you need.

What Is Product Liability Insurance?

Product liability insurance is a type of coverage used to protect against claims of bodily injuries or property damage. This coverage is intended to help you lower or eliminate the cost of a claim in the event of an accident. It is also often required by manufacturing or retail contracts since product liability claims can get expensive.

When you place a product on the market, you run the risk of someone trying to sue you for an accident your product caused. Common product accidents we see are:

  • Choking on small parts
  • Allergic reactions to ingredients
  • Cuts, bruises, or burns
  • Illnesses from ingestion or exposure
  • Damages to property (such as fire or water damage, stains, or broken household items)

Even if you test your products frequently, accidents can still happen. Oftentimes there can be defects or damages that occur during production or shipment, causing problems you are unaware of. 

Who Needs Product Insurance?

If you deal with a product at any stage of development or market placement, then you need product insurance. Just a single claim can name dozens of businesses responsible. This includes:

  • Suppliers
  • Manufacturers
  • Importers
  • Distributors
  • Wholesalers
  • Retailers
  • Online Sellers
  • Dropshippers

If you produced, supplied, transported, or sold a product that caused an injury, illness, property damage, or death, then your business played a role in putting the faulty product into the hands of the customer.

For those who handcraft their own products, you are seen as the “manufacturer” and can still be held liable. In fact, manufacturing defects are the leading cause of product accidents. If a supply or ingredient you use to make your product is recalled or deemed unusable, and you are not aware, you can still be held responsible for any accidents that occur.

Whether you physically make the product you sell or outsource the production, you are ultimately the owner of that product. It is your responsibility to ensure your product is safe for consumer use.

What Can Product Liability Coverage Protect Me From?

Product liability coverage may protect you from paying for costly claims on your own. Similar to how car or health insurance works, product liability insurance may help lower or eliminate the cost of medical bills, lawsuits, and even product recalls.

Your insurance may also help you with instances of warning or label errors. Failure to provide warnings or mislabeling can lead to unforeseen accidents you could later be held responsible for. 

Many insurance companies offer more than just product liability insurance to help you have better coverage for your business. It’s common to have more than one coverage on a policy plan. 

You’ll typically see the following types of additional coverages in conjunction with product liability insurance.

  • General Liability Insurance: This coverage applies to third-party injuries or illnesses that occur because of your business operations, such as slip-and-fall accidents.
  • Tools, Supplies, & Inventory Coverage: Also known as Inland Marine Insurance, this helps cover damages or theft to the items you use to run your business. This can include equipment you use to make your product, your supply of ingredients, the computer you store private company information on, and even your product during shipping. 
  • Product Recall Coverage: If you have a product get recalled, this coverage may help you cover the cost to remove the product from the market. It does not cover the lost profits of the recalled product.
  • Personal & Advertising Injury: In some instances, you may be sued for accidentally using a copyrighted image on your packaging. Or, you may use an advertising idea similar to a competitor who files a lawsuit. This coverage may help pay for those costs.
  • Medical Expense Limit: This coverage helps to pay for the medical expenses of an injured or sick customer who’s ailments were caused by your product or business.
  • Professional Liability Insurance: Also known as Errors & Omissions Coverage, this is designed to cover you for any professional advice or services you may offer with your product. 
  • Cyber Liability Insurance: If you take online payments or electronically file private business and customer information, you are at risk of having this information stolen or ransomed. This coverage may help cover the cost to retrieve stolen data or funds.

How Do I Get Product Liability Insurance?

Getting product liability insurance is easier than you think! You can now apply for a quote and buy a policy directly from an agency online. It’s a far simpler and faster process than trying to go through your homeowner’s insurance or meet with an agent in person. Plus, it’s often cheaper!

You can apply for a free product insurance quote today with Insurance Canopy. Our online application only takes a few minutes to fill out, and one of our agents will be in touch with your quote within one business day.

Don’t Risk It!

As a small business owner, you’ve taken a lot of risks to design your own product or build a business from the ground up. One of those risks should never be forgoing insurance protection. Your business deserves quality coverage tailored to you. 
Take risk management into your own hands by applying for product liability insurance today!

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