Product Liability Insurance

Does your business manufacture goods? Or do you sell goods that have been manufactured elsewhere?

Product Liability Insurance

If you’re in the business of manufacturing or selling products, then you should get product liability insurance. To run a successful business, we all strive to produce and offer top quality goods that our customers can be satisfied with and will keep coming back for more. But mistakes do happen, and the products we sell could sometimes be faulty. It could just be a one-off, a rare blip in the production line. Or it could be something more serious. Product liability insurance can cover you and your business in the event of any compensation claims made against you.

In This Guide:

What is product liability insurance?

Product liability insurance is a form of business insurance, designed to cover you and your business if unforeseen claims are made against you. It specifically covers you for claims related to any damage, injury or illness caused by products you’ve made, sold or both. Product liability insurance is important if you’re selling any kind of good, because even if you had absolutely nothing to do with the manufacturing of the product, you can still be sued.

Cover from Churchill Expert

We’re working with Churchill Expert, who are offering business insurance that includes £1m product liability cover as standard. This can be increased to up to £10m in certain circumstances, subject to criteria.

What does product liability insurance cover?

If anyone is injured or taken ill as a result of using a product you’ve made or sold, product liability insurance can cover the costs of any compensation payout as well as any legal fees involved. Usually, you will be covered if any claim is made against you up to three years after a customer used your business’s product. With some policies, you can be covered even longer than this.

Product liability insurance can cover you if there was only one faulty product that led to a large compensation payout of a few thousand pounds. But it can also cover you if there is a major issue with your product. For example, if you own a factory that produces components for a particular model of car, and they all turn out to be faulty, the compensation claims made against you could run into the millions of pounds.

Do I need product liability insurance?

Product liability insurance isn’t required by law, but it could prove to be vital to the survival of your business if there was to be a fault with one of your products. Depending on your line of work and what you sell, your manufacturer, supplier or retailer may even require you to have a minimum level of cover.

Product liability insurance is not only reserved for big businesses with long production lines. Even if you work by yourself, making or selling a select few products, or even if it’s not your main business and just a bit of fun, you could still be liable for any faults in your goods.

Examples of when you could be liable and therefore should consider getting product liability insurance include:

  • If the name of your business or company is on the product.
  • If your business has made changes to or repaired a product.
  • If your business imports products from outside of the EU.
  • If you’re not sure who your manufacturer is.
  • If the manufacturer of your product has gone out of business.

What level of product liability insurance should I get?

The level of cover you get for your business is up to you – there is no minimum level required by law. Some products may have more risks associated with them than others. Whatever your level of product liability insurance, you can be covered for any compensation claims made against your business up to that amount. For example, if you got covered for up to £5m, your insurer will pay out for any claims up to a limit of £5m over the course of the term, say a year. You should also get enough cover in case of any legal costs you think you may face.

There are a number of factors that influence the premium you will pay. Generally, the riskier your products, the higher your turnover and the higher your level of cover, then the more you will pay for your product liability insurance. Your premiums may also be affected by your claims history.

If you’re doing contractual work, it will often be stated in your contract what minimum level of cover you are required to have.