Product Liability Insurance


What Is Product Liability Insurance?

Product Liability Insurance is a first-party, specialized insurance that protects against tampering, contamination, crisis management expenditures, and recall costs associated with unfavourable publicity associated with a product recall. This coverage may be obtained in addition to general liability or as a stand-alone insurance.

This form of insurance can assist you in managing the negative consequences of a recall and will act as a safety net while you strive to rehabilitate your business’s image and reclaim the public’s confidence and patronage. It’s critical to remember that a recall may occur without the company’s fault.

This sort of insurance is available in two forms: voluntary and involuntary. Numerous corporations have chosen voluntary recalls, which eliminates the need for them to wait for the government to order an obligatory recall. This mitigates the negative consequences of government intervention.

The corporation is voluntarily recalling the product to acknowledge its fault. With involuntary recall, you run the danger of being seen adversely by the public for failing to exercise due diligence or, worse, for concealing the facts.

What Is Covered by Product Liability Insurance?

A product recall might result in severe financial loss. Product Recall insurance protects your firm against financial damages incurred as a consequence of having to recall a product you sold or utilised, whether voluntary or involuntary.

Is Product Liability Insurance Necessary?

This sort of coverage is advantageous if your business:

  • Depends largely on human labour
  • Will be severely harmed by a recall
  • Does not have the financial resources necessary to bear the expense of a recall
  • You will be unable to oversee the distribution and sale of your goods. You will also be unable to supply tamper-proof packaging.

What Are a Product Liability Insurance Policy’s “Limitations”?

Product Liability Insurance limits vary, but are often included in the limits of a General Liability insurance. The most frequent price range is between $500,000 and $5,000,000. The actual price will vary depending on whether you choose basic or enhanced coverage.

You’ll Know It’s the Correct Policy If It’s the Following:

  • Defends your company from bankruptcy
  • Expenses associated with shipping, advertising, and promotion
  • Includes the expense of removing faulty items from circulation.
  • Will financially safeguard you against the expense of repairing the manipulated, damaged goods
  • Pays all applicable commissions to wholesalers, retailers, and agents
  • Included are the costs associated with company disturbance or interruption.
  • Assists your business in repairing and rehabilitating its reputation, as well as covering management expenditures

What Is Not Covered by Product Liability Insurance?

Concerns about quality and performance

Typically, this insurance does not cover concerns of quality or performance. A customer cannot recall goods solely based on their unhappiness. Additionally, it excludes warranties.

Intentional Transgression

The policy does not cover intentional violations of industry standards or regulatory legislation.


Specifically, losses incurred as a result of a competitor’s goods.

Liability To Third Parties

Third party liability coverage is not always available via Product Liability insurance.

Costs Associated with Redesign

May not necessarily include expenditures associated with recall-related advertising or redesign.

What Is The Cost of Product Liability Insurance?

The cost of this insurance will be determined by numerous criteria, including the following:

  • Your business’s size
  • The quantity of items
  • Extent to which protection is sought or needed by state-mandated limitations
  • Risk considerations include the cost of media and shipping, the scope of the recall, the cost to consumers and your company of lab testing and storage, legal expenses, lost gross profit, and reimbursements.
  • Indemnification of third parties
  • A skilled crisis consultant is required.

Every business that manufactures, packages, or distributes items for wholesale or retail must have a Product Recall Plan in place. It will limit your financial exposure if any of your items need to be recalled. Consider this form of insurance as your first line of defense in the event that one of your goods fails.

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