What is Product Liability Insurance: Why Do Businesses Need Product Liability Insurance?

You must protect your business from claims that the product you manufacture or sell has caused bodily injury or property damage to someone else. You do this with product liability insurance. Insurance companies may include it as part of your general responsibilities or offer it as a standalone policy. If you don’t have product liability insurance, you will have to pay for liability coverage costs out of pocket when customers complain about product defects. In some cases, you may have responsibility for the product even if you did not actually manufacture or sell the product.


Product Liability Insurance for Small Businesses

Any business that sells products to customers may be at risk of damaging someone else’s property or injuring others due to a defect in their product. A defect in the product you are selling could result in injury to the customer. As a result, the customer will most likely sue your business. Small business insurance online will take you through the legal process by covering some things. If you do not have this insurance, you will pay many costs out of your own pocket. If your business does not have the resources to cover the costs of these lawsuits, the situation will get worse.


Since small businesses have difficulty meeting high production costs, the chances of manufactured products not working properly may be somewhat high. Every manufactured product may have a defect that could result in property damage or bodily injury. For this reason, all businesses that sell products have product liability coverage. Product liability insurance will protect businesses if a product causes harm to third parties.

Product liability insurance liability coverage:

  • To cover the costs that will arise when the enterprise is condemned to make payments by a decision against the enterprise,
  • To cover the medical costs incurred to treat the client’s injury,
  • To meet the payments made to defend the business before the judiciary,
  • In case of problems that may occur due to the fact that the business does not give accurate and sufficient warnings about the use of the product,
  • Errors in the production phase of the product,
  • Defects in the design of the product,
  • In cases where the customer is damaged by the product even though it is not the negligence of the business owner.


If the manufacturer of the products you sell is different and that manufacturer is outside the EU, cannot be traced, or goes bankrupt, its liabilities can also be placed on you. In this case, your business will still be responsible.


Product recall insurance and product liability insurance are two different things. You have the chance to add both fuse types into CGL insurance.


Reasons for Needing Product Liability Insurance

Those who have a supply chain and those who sell products to customers must have product liability insurance. Both large companies and small businesses should take advantage of this insurance with the policy that suits them. Because a problem that may occur at any stage of production may create a defect in the products and put the business at risk of product liability claim. That’s why it’s important to protect the business with the right type of insurance.


  • Wholesale and distribution businesses
  • Producers
  • Retailers


Cost of Product Liability Insurance

Product liability insurance comes as part of the general liability insurance policy. You may encounter different insurance costs for different businesses. Factors such as policy limits, location, industry, and demand history affect cost. The best way to find out the cost of general liability insurance for your business is to get quotes from several insurance companies. You should check with several insurers for policies that cover the coverage your business needs.


Is Product Liability Insurance Legally Mandatory?

Although it is not a legal requirement to have product liability insurance, retailers, manufacturers, distributors, suppliers or other collaborative companies you work with may request you to take out this insurance.



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