Product liability insurance can help cover your legal expenses if someone claims that a product you sold, made, or distributed caused an injury or property damage.
If you sell, make, or distribute products, you likely need this policy.
If that product allegedly hurts someone or damages their property, product liability coverage will help pay your legal fees, judgment, or settlement. Anyone can sue over damage from a product, even if they didn’t buy it or use it.
A product liability policy is also crucial for construction and contracting businesses. It offers financial protection when a client sues over a personal injury or property damage related to your completed work.
Yes, for several reasons.
First, your business might be unaware it sold a defective product. Anyone involved in a product’s supply chain can face a lawsuit if that product causes harm or financial losses.
Second, a customer might also claim your business provided insufficient warnings or inaccurate instructions. If they get injured using your product incorrectly, they could blame your company.
Finally, a customer could sue because they’re unhappy with your product. Even when a lawsuit is frivolous, your small business still needs to pay for a legal defense.
Manufacturers invest in this coverage for protection when customers sue over a product. It can help pay for lawsuits related to design defects, manufacturing defects, and similar issues.
General contractors and other construction and installation professionals need this coverage in case their work is linked to an injury or property damage after it’s completed. For example, if a homeowner sues because their newly installed sink leaks and damages their flooring, this policy would help pay your legal costs.
Professionals who work in the beauty and cosmetology industry should also invest in product liability insurance. If a product that you apply or sell causes an allergic reaction or other adverse effect, this coverage can help pay your legal defense fees and the cost of a settlement.
Restaurants and other food service businesses rely on product liability insurance to protect against legal costs related to food poisoning and food allergies. If a customer gets sick after eating at your restaurant, this policy can help pay for attorney's fees, court-ordered judgments, and other costs.
Insurance companies usually include product liability insurance with a general liability policy. This is typically called products-completed operations coverage. “Products” refers to the items you make or sell. “Completed operations” refers to completed work.
But some retailers or manufacturers may need to buy this coverage outside of their general liability policy.
Check with your agent to make sure your general liability policy includes this coverage. When you purchase a policy, you’ll get a certificate of liability insurance as proof of insurance.
Though they are often purchased together, these two policies are not the same.
General liability insurance provides coverage against the most common small business claims. It covers accidental damages, such as a customer slipping in a puddle at your shop and breaking an arm (or their phone). It also helps pay for lawsuits that claim you damaged a competitor’s reputation or copied their logo.
Product liability insurance covers damages related to your products or completed services. That’s why manufacturers, retailers, and contractors need both types of coverage.
Product liability insurance is not designed for software, applications, and similar IT and technical products. Tech business owners should opt for an errors and omissions insurance (E&O) policy to protect against coding mistakes and software errors.
Product liability insurance covers lawsuits over physical harm caused by a product. For example, it would provide coverage if your software caused a battery to overheat and injure someone.