NYC Insurance Blog

What is Product Liability Insurance for Small Businesses?

Imagine having worked hard to create your product. You have thought of every possible mistake and taken action to correct it. You and your employees have spent days and years ensuring that your product is as good as possible. You have done everything from packaging to product distribution and warning labels. 

However, before and after you can take your perfect product to the market, it may cause harm to a customer or your employee. In this case, you should learn to protect your small business against claims. As a business owner, it is wise to take up coverage that shields you from any potential issues arising from product damage or personal injury.

That is why you need a product liability cover. 

What is Product Liability?

Defective or dangerous products can cause a lot of harm to the consumer. Therefore, there is a law that helps rule out who is responsible for faulty products. Usually, the law enables the injured party to file for claims to help them recover from damages. Get a Quote today, call our office and speak to an Agent.

In this case, product liability falls on the manufacturer or distributor of a product. Product liability holds the wrongful party liable for placing dangerous or defective products in consumers' hands. 

What is Product Liability Insurance?

To protect your small business against claims filed due to your products, you can take up product liability insurance as a business owner.

Product liability is a form of general liability insurance meant to protect your business from legal consequences should your product result in property damage or bodily injury to the customer. Usually, the cover caters to legal and court fees and financial losses you may incur due to your defective products hitting the market.

In essence, product liability insurance is your way of protecting your business from financial losses. For instance, if you sell drapes that happen to be highly flammable and catch on fire, damaging your customer's kitchen, you could end up in court.

What Does Product Liability Cover?

There are different claims that you can cover with product liability insurance. These claims include contamination, government recalls, accidental, flawed marketing, etc. 

With a product liability cover, your small business will receive different types of protection, including:

• Accidental contamination- when your product is accidentally contaminated with harmful products
• Manufacturing or product flaw- When your manufacturing practices are sub-standard
• Product defect- When poor design or insufficient testing on your product causes a customer harm
• Insufficient labeling- when you put inaccurate or misleading information on your product label, resulting in customer harm
• Flawed marketing- when you use inaccurate or misleading information to increase sales
• Extortion- when malicious behavior causes one or all of the situations mentioned above
• Government recalls- when the government finds your product unsafe and forces you to remove your product from the market.

Why Do You Need Product Liability Coverage?

Product liability insurance is an absolute requirement if your business sells a product to the public. You can never be 100% certain that none of your products will harm the user. 

Even if you test your products a million times, accidents happen, and your product might be the cause. The battles to settle these claims with a dissatisfied customer can be long and expensive. And without a proper product liability cover, you may lose your business.

Remember, product liability claims are costly. Therefore, it makes sense to take up product liability insurance to protect yourself from the financial burden. So, the product liability coverage gives you the peace of mind that you have a formidable net to fall back on when customers launch claims against your product. 

However, the product liability cover does not include:

• Employee injuries
• Product damage
• Lost inventory
• Professional liabilities
• Product recall costs
• On-premise injuries.

For these claims, you can take on other insurance policies to cover them. Such policies include worker's compensation, property insurance, and professional liability insurance. So, if you need to cover the cost of any product recalls, you may have to take on product recall insurance.

Which Small Businesses Could Use a Product Liability Cover?

Only a few small businesses really understand the type of coverage they need to protect their businesses. Even with a general liability policy, you would need a product liability cover if:

• You are a manufacturer
• You commission your manufactured products
• Your company's name and logo appear on the product
• You outsource your materials from unidentified suppliers
• You offer product repairs or repurposes

Examples of small businesses that could use a product liability cover include:

• Children stores
• Clothing and apparel sellers
• Food manufacturers
• Beauty and cosmetic product sellers
• Appliance sellers
• Manufacturers
• Pet stores
• Resellers
• Restaurants
• Food manufacturers, distributors, and wholesalers
• Home improvement businesses

Other Policies That Small Businesses Need

In addition to the product liability cover, your small business could use a little extra protection. We offer all kinds of insurance, not just Liability! Let us help you with all your insurance needs.

You can get this from insurance covers such as:

General Liability Coverage - in cases of accidents when working. It covers property damage and physical injuries, copyright infringement, and many more

Professional Liability Insurance - for when customers file for work errors, negligence, and missed deadlines that resulted in their financial loss

Commercial Auto Insurance - for when you use your vehicle for business reasons

Worker's Compensation - for when your employee sustains injuries at work

Commercial Property Insurance - to protect your inventory, tools, equipment, technology, and property in case of repairs and replacements

How Much Does Product Liability Cost?

Like any other insurance cover, the amount you pay for your product liability coverage will depend on the insurance company you hire. However, most small businesses buy the policy as part of their general liability insurance. Call NYC Business Group, we will give you pricing, and the right amout of coverage for your products and business!

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