Despite the good intentions of business owners, almost any product has the potential to cause physical harm or damage. Once products leave production and enter the public sphere, many potential liabilities surface — food items could make someone sick, toys could pose a choking hazard, hot drinks could lead to burns, and manufactured parts could cause expensive machinery damage.
Additionally, as your product inventory expands, it’s especially important to protect your investment and your bottom line. While product liability insurance is not required by law, this type of insurance policy can offer much-needed protection in the face of product-related bodily injury, property damage, and other liabilities.
According to Business Insurance, the number of product liability cases has increased considerably over the past five years, including 5,826 filed at the federal level in 2022 alone — representing an 89% increase compared to the lowest number of cases in the last decade. The facts are clear: businesses that manufacture, distribute, handle, or sell any number of products are vulnerable to financial losses associated with product recalls, defects, failures, and ancillary damages.
Benefits of Product Liability Insurance
Strategic Reasons to Invest in Insurance as Inventory Expands
Securing product liability insurance coverage is an important tool in mitigating risk, especially as your company’s product inventory grows. You’ve already mastered offering valuable products to your customers, improving sales and loyalty. Now it’s time to consider purchasing product liability insurance, which offers the following key benefits:
1. Extensive Coverage
Product liability insurance covers a wide range of defects including strict liability, marketing defects, design defects, improper warnings, and more.
2. Financial Protection
This type of insurance protects businesses against the significant financial fallout that may arise with claims of physical harm or damage, including medical costs, legal fees, and compensatory damages.
3. Low-Cost Options
While premiums vary based on your industry, claims history, and other factors, product liability insurance offers a cost-effective means of protecting a business’ long-term financial wellness.
4. Varied Offerings
Unlike some other insurance products, additional liability protection is available at the state level if your liability risks are substantial, or the lawsuits you are facing fall into any of the following 3 categories — strict liability, negligence, or breach of the fitness warranty.
5. Legal Security
Coverage provided by product liability insurance helps pay for essential legal fees, including the representation of a product liability lawyer who understands how to effectively manage cases involving product-related claims.
Product Liability Insurance FAQs
What Does Product Liability Insurance Cover?
Standard product liability insurance policies cover injuries or property damage costs, including legal fees, medical bills for injured parties, and compensatory damages. It’s also important to note that product liability protection rarely covers recalls, inventory losses, or employee injuries.
How Does Product Liability Insurance Work?
If sued, a company can rely on product liability insurance to cover legal costs, medical bills, and other financial losses. It can be added onto a general liability insurance policy or secured as a standalone endorsement to protect against costs when third-party claims of defective or faulty products are brought upon a business.
How Much Does Product Liability Cost?
Premiums vary by industry and level of inventory — but the average annual cost for product liability insurance is about $1,200 for small businesses in the manufacturing, retail and wholesale industries with revenue of less than $1 million, according to NerdWallet. Other factors that impact how much product liability insurance costs include geographic location, policy limits, and claims history.
How We Can Help
At Doeren Mayhew Insurance Group, we have extensive experience guiding business owners through the complexities of purchasing the right liability insurance coverage. When your thriving business continues to expand its product inventory, it’s the perfect time to invest in customized product liability insurance solutions.
We can help ensure long-term protection in the face of third-party claims of product-related injury or damages. Contact us to discuss your needs with one of our dependable insurance advisors.