what is product liability insurance

Despite the hard work that small businesses put in to ensure they manufacture high-quality goods, there is still the chance that products could fail to work properly. For example, a children's apparel company could produce clothing that fits improperly and poses a suffocation hazard, or a food service business could bake pastries with an ingredient that triggers a customer's allergic reaction.

There is always the potential for defects that can result in bodily injury or property damage - serious risks neither your business nor customers can afford. That’s why all businesses that sell products should have product liability coverage. Find out what product liability insurance is and how much your small business might need:

How does product liability coverage work?

Product liability insurance isn’t merely a product guarantee or warranty. It protects businesses from the fallout that occurs in the event that a product causes injury or other damage to third parties.

Consumers can be harmed by how a product is manufactured, designed, marketed or misused. Even if a product is used incorrectly, your business could still be liable for any damage that results.

Your business is responsible for making things right. Product liability insurance can help protect you in the event that your business faces a lawsuit. In 2014, there were 58,496 personal injury/product liability cases – a 20% increase from 2013. One law firm found the average jury award in product liability lawsuits in 2012 was $3,439,035, with the median award totaling $1,503,339.20. With an increase in claims and the high cost of lawsuits, product liability coverage has become all the more important for small businesses.

Getting hit with a product liability lawsuit is an expensive and stressful experience. Product liability insurance covers the legal fees that could otherwise lead to major hardship. Also, the insurance covers medical costs, compensatory and business damages.

How much product liability insurance does your small business need?

How much coverage to buy depends on what and how many products you sell, the volume of sales and the number of parties involved in production. As a rule of thumb, the more output, the greater the likelihood one of the products could have some type of defect. As your small business grows, this could become a bigger concern over time.

Product liability insurance is a must even if your role in the manufacturing, sale or distribution process is marginal. Talk to an agent today to make sure you’re covered.

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