Business. It’s exciting and fun to build your own. If you know anything about it, you already know you must be insured.
Do you sell products? If so, guess what? You can easily be sued for a number of reasons. Any time a product harms, injures or costs a customer money beyond the purchase price, you may be liable.
This is why if you sell ANYTHING at all, you better cover your butt by having product liability insurance! It only takes one lawsuit to put you under. Don’t be naked in regards to having the right coverage!
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What Is Product Liability Insurance?
Well, it’s coverage you need if you sell any product. In fact, ANY business in your supply chain can be sued. The manufacturer, distributor or the store selling the product can be held liable in any suit. Without the right type of policy, you are at risk!
This is a specialized coverage that will supplement your general policy. Your general policy is necessary, but it only covers protection for general liability issues. If you sell goods, you will need coverage on top of that. Product liability exposure lasts as long as the product is in use.
You may need to be covered even after you close your business.
Not every company needs every type of specialized coverage. It depends on what your business does and sells. Your agent will be able to speak with you about your needs.
I Only Sell Very Small Products. Do I Still Need Liability Insurance?
Yup. Only if you like your company and don’t want to lose it. Get product liability insurance for small business, and you will likely stay in business.
YOU are responsible for the safety of your products.
I Know My Products Are Safe. Do I Still need Products Liability Insurance?
Lord help us… you may THINK your products are safe. Maybe they are. Maybe you sell hand-knitted wool caps. Pretty safe, right? Think again.
Some people are allergic to wool. Your customer may fail to read the huge letters in your ad stating that it’s made of WOOL. That’s not your mistake, but they can still sue you!
And you could easily lose. Business=gone. You=broke.
Why risk it? You need product liability insurance for small businesses.
My Business Expenses Are High Enough Without Adding Another Expense. How Much Does This Cost?
How much does product liability insurance cost? Well, it depends. The bigger your company, the more it costs you. The more likely your product is to do potential harm, such as selling a food product, the more it costs you. Think of it as your ‘risk factor’. Items like fireworks and guns are a higher risk than teddy bears or socks.
The average cost of product liability insurance is about 26 cents per $100 of retail costs. Of course, this varies depending on the type of product you sell.
Look at it this way. Which is more expensive? A $200 a year policy or a $500,000 order from the judge from a lawsuit you lost? Hmmmmm. You do the math. It’s really a priceless thing to have in the long run. Your product liability insurance cost will more than cover your butt when you are in a lawsuit! If you go uninsured, a lawsuit could easily bankrupt your company and crush your dreams.
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So, What Does Product Liability Insurance for Small Business Cover, Specifically?
Here is a brief summary of the types of protection you will get:
- Accidental product defect
- Accidental Contamination
- Mistake in labeling or insufficient label information
- Extortion
- Malicious Tampering
- Flawed Marketing
- Government Recall
Below Is A Chart Showing You Some Of The Claims That Might Be Brought Against You:
Type Of Claim |
What It Means
Example | |
|---|---|---|
| Accidental Contamination | When a product gets something in it that's not supposed to be in there. | You've heard of examples many times. Some food gets contaminated and there's a big recall. Lawsuits ensue when people get really sick or die. |
| Wrong Label or not enough information added to label | If you didn't let the consumer know what is in the product, or gave them the incorrect information. | You sell a product that has peanuts but you don't add this to the label. Lots of people are going to react and could die. |
| Accidental defect in product | You didn't test the product well enough and something goes wrong with it. | You hear auto recalls all of the time. If an airbag is defective or there's a brake problem, all of those autos get recalled for repair. |
| Extortion | If some asshole contaminates your product on purpose and he wants it to hurt people. (What is wrong with people?) | In 2003 there was a major ground beef recall when insecticide was injected into beef by a disgruntled employee. |
| Malicious Tampering | When you have an asshole working for you (see Fidelity Bond Insurance) and he contaminates your product making big trouble for you! | Say you make remote controlled cars. A dickhead of an employee wants to 'punish' you for not giving him the raise he didn't deserve. He leaves a few screws out about 500 cars. This hurts your reputation once it gets out. |
| Flawed Marketing | Simple- when your marketing lies about what your product really is or does! Or, if it deliberately misleads them. | You sell remote controlled cars. Your advertising campaign states that they can go up to 20 mph. They only go 15 mph. Now you're in trouble. |
| Government Recall | The government comes in and forces you to recall your product because it's not safe for consumers. | In 2011, Toyota had it's vehicles recalled when accelerators were getting stuck, resulting in the death of at least one family. |
These Are Some Things You Want Your Policy To Provide For You:
- It pays any fees to agents, wholesalers, and agents
- It takes care of the cost in the event your business is disrupted or interrupted
- Includes shipping, advertising, promotional expenses
- Includes covering the cost to dispose of the defective products
- It covers the cost of replacing a defective or tampered with product.
- It will assist in the cost of repairing your reputation after an incident and also covers management costs
- Protects your company from bankruptcy
- What does product liability insurance not cover?
Product liability insurance does not usually cover quality and performance issues. A consumer cannot cause a product to be recalled based on dissatisfaction alone. Talk to an agent to be sure you are properly covered for your situation.
In Addition, This Type Of Insurance Does Not Cover:
- Warranties
- Intentional violation of industry best practices or governmental regulations
- Losses involving a competitor’s product
- May not accept third party liability
- May not always incorporate the costs of recall-related advertising or redesign costs
In conclusion, be sure you have the right policy for your needs. Because there are many exclusions, you need to get the right policy for you. Speaking to an agent is the best way to assure that you have the right policy.
If you are interested in seeing what the exact price would be for your business, contact Hiscox and you will receive free product liability insurance quotes. There is no obligation on your part. Even if you just want an idea of how much this coverage would be, give them a shout and they will be happy to help you.
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Make sure your business has the right coverage. Check out other types of commercial insurance.
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