What is product liability insurance?
Product liability insurance protects a business financially if its product causes harm or property damage to a customer. It is not just for businesses that manufacture a product or products from scratch, but also those that assemble, supply or sell them.
If a person is harmed by a product or their property is damaged by it and makes a claim against your business, product liability insurance may cover the cost of investigating or legally defending it. If a claim finds your business responsible for this harm, this insurance may also cover compensation and other related financial costs.
What to consider when choosing insurance for product liability
When purchasing product liability insurance, cost is the first factor many business owners consider. However, there are also several other factors to keep in mind when selecting the right cover for your business. If you understand your unique requirements and research all your options, you may be more likely to find the most appropriate policy for your business.
Cost
Policy premiums can range significantly, depending on what is or is not included in the cover. You may determine that your business cannot afford the cost of the best coverage. Similarly, the cheapest policy may not provide adequate coverage for your needs. Premium prices may also vary between insurance providers.
Level of cover
Insurance providers often offer different amounts of cover, such as $5 million, $10 million and $20 million, meaning they will pay an amount up to and including the limit if you are liable for a product causing harm or damage.
The policy premium may change depending on the level of cover, so if you think you will not need the top level of cover, it may be cost-effective to choose a lower amount. However, if you are underinsured and a problem arises, the financial protection provided may not be sufficient, which puts your business at risk.
What is covered?
Product liability insurance policies generally have the same inclusions and exclusions, but there may be some differences to check for. Businesses typically purchase a policy as an addition to their standard liability insurance that may cover product recalls or loss of use.
Moreover, the definition of a “product” can differ between policies, so read the wording carefully to ensure it’s appropriate for your business.
Insurance provider
You may like to consider information about the insurance provider and its operations when making your choice.
Some insurance providers may bundle product liability insurance with public liability insurance. You may have other insurance policies, such as professional liability or business car insurance, with one provider that may offer a discount for holding multiple policies with them. Online customer reviews may also be useful, as you may prefer to purchase a policy from a provider with whom other customers have had good experiences.
What to avoid when choosing product liability insurance
Just as there are factors to consider, there are also factors to avoid when making your decision.
Being pressured into a decision
You may feel pressured by a provider to agree to the terms and conditions offered by them, especially after you request a quote. Taking the time to consider a policy fully can help ensure that you purchase the right one for your needs. Furthermore, remember that insurance policies have cooling-off periods, so if you are pressured into a decision, you may be able to cancel the policy during this period without penalty.
Only considering one option
The first policy that you consider may not be the best one available in the market. Insurance providers may have different inclusions and exclusions, so gaining quotes from several providers allows you to assess different options. In the end, you may choose the first option you researched, but you will gain peace of mind knowing that it is the best for you.
Never reviewing your policy
It can be beneficial to review your policy regularly, with the renewal notice serving as a good reminder to check that your insurance still meets your needs. For example, your business operations may have grown or declined during the policy period, which may affect the level of cover required.
Also, other providers may have created new policies since you took out your policy, and one of these may better meet your needs. Read over your policy to ensure it still meets your needs, and consider other policy alternatives.
Whether you run a large or small business, product liability insurance policy decisions can be difficult. By taking the time to research your options and identify your needs, you can trust that you can make the right decision for your business.
