Does Your Manufacturing Business Need Product Liability Coverage?

If your products cause harm to a person or damage to their possessions, you could be liable to pay for any recompense charges.

Product liability can cover those costs on your behalf, helping you to avoid unnecessary expenses.

You might not have manufactured faulty products; you can still be held responsible for any occurrence if you are the seller, and the product has your name on it. Therefore, your manufacturing business really needs product liability.

You must stick to the conditions as to quality control of products in order to be covered by your policy. The exclusions on your policy must be checked to ensure you have covered the best fits for your business. There are some products that actually invite more risks than others, ensure that the level of cover you have is the right one for your business.

The types of liability insurance you may need to consider include:

  • Public liability: This type of policy prevents you and your business against the monetary risk of being found liable to a third party for death or injury, damage of property or economic loss as a result of slackness.
  • Professional indemnity: This protects advice-based businesses from lawful action taken for losses incurred as a result of negligence; it provides insurance cover if your client suffers a loss.
  • Product liability: Cover against claims of goods causing death, injury, or damage is known as product liability. It covers you if any of these occurred to another business or person by the failure of your product or the product you are selling.

Liability Insurance is necessary to protect the small business owner from possible lawsuits. This insurance may be sold as part of larger insurance packages for business owners. You need to read the liability insurance carefully and any riders or disclaimers that may be added to your insurance policy. This is a general overview of what Liability Insurance covers and does not cover.

Liability Insurance covers injury or damage from the item sold by the business owner.

This item may have been faulty, designed poorly by the manufacturer, or lacked proper and needed warning labels.

Liability Insurance does not cover the following items:

Injury to a worker in your business, even if it is a faulty item or poor design from the manufacturer. Employees are not covered by Liability Insurance.

Damage to your business or vehicle by an item sold by the business. The small business’s fire insurance, car insurance or property insurance should be used to cover your business in this instance.

Recall items are not covered by product liability insurance. As the seller, it is your job as the expert of the products in your business to remove items that have been recalled. Insurance companies also offer withdrawal insurance to cover recalled items.

How Business Liability Insurance Works for Product Liability

If you operate a small business, you know how important it is to handle everything with importance and to offer the best in quality and service. But you also know that no matter how hard you try to provide the best, customers can still claim that you’re at fault in a situation (even if you’re not).

Nearly 80% of companies in the US are set up as a sole proprietorship or as a partnership. This kind of structure generally sets up a small business owner with a lot of risk… both in the company and personally.

Business liability insurance covers your assets  both business and personnel  from damage through lawsuits.

In the case of a lawsuit filed for individual or property damage, this type of insurance covers legal fees and damages. Business liability is a big problem for most small businesses, because they don’t understand it, and they don’t really know the risk of not having it.

Having a general liability policy is the rule of thumb – it provides the protection against things across the board, such as accusations and lawsuits against you for false marketing… to injury claims and damages to property. Many companies who invest in liability insurance choose only this type of policy.

If, however, a business is selling products, product liability insurance is key. A suit brought against a small business based on personal injury or property damage resulting from a defective product can easily put a business out for good…

product liability insurance protects a business from that danger by covering the expenses in those situations.

The cost for a product liability policy varies. If the product you sell is low-risk (like bookmarks) then your policy would be much more inexpensive than a policy for a company that sells something that could feasibly harm people, such as curling irons or flat irons, which involve high heats close to a person’s body.

The most important thing is to evaluate the matter seriously, as you would anything else in your business, and check the options available that can help minimize your risk.

The first type of product liability insurance coverage involves a production flaw, which means that during the manufacturing process there was a flaw which can turn up later and injure someone. If you sell this product as a retailer you can still be held liable. A design defect will be covered by product liability insurance as well.

A design defect did not happen during the manufacturing process but the party or parties that designed the product did not see that the product will eventually fail. Poorly labeling of a product could get you hauled into court. An example of this is the label on motorcycles warning that this product, if not used properly, can injure and kill.

Your business is too valuable and you worked too hard to build it up and then lose it in a court suit. Pay the extra money for product liability insurance and sleep better at night.

How to Know If Your Business Needs Liability Insurance?

New businesses have a tough road ahead of them – many don’t survive, and the ones who are going to make it have to make good decisions from the beginning. Business insurance is no exception – its crucial for a business to plan for a worst-case scenario, and to anticipate things that could come up.

Liability insurance helps a business avoid major losses that could create huge setbacks, and sometimes even cause the end of the business.

Ideally, a business should get a liability insurance policy early on because a lawsuit or other liability issue could cause financial ruin if it is in the early days of a business.

But is it for everyone? How does a business owner know if they need to get business liability insurance?

The business owner has to first know what kind of business they are running, and where its headed in the future. What kind of products and services will you be providing? Who will your clientele be? What kind of new products or services do you see yourself adding in the future?

These questions help you identify which type of insurance would be best suited for your business. Four options are product liability insurance, employment liability insurance, professional indemnity insurance, and general liability insurance. You can get these in different combinations and packages, and see different pricing options from different companies.

If you’re not selling or manufacturing or giving away products, you don’t need a product liability insurance policy. If you’re not providing a professional service, you don’t need professional indemnity insurance. If you do not plan to hire employees, you don’t need employment liability insurance.

Most businesses can benefit from general business liability insurance, because it covers a variety of possibilities, including claims of injury, false marketing, accidents, and more.