What is Product Liability Insurance(PLI)?
Product liability insurance is a must-have for any business. It keeps you safe from claims of product failures, flaws, or injuries caused by products. It’s a requirement by law in most states, or you can buy it to give your business extra-legal security.
Either way, you should see it as valuable coverage that gives you extra peace of mind and protection.
You’ll most likely have to pay these compensation costs if you make the products you sell. However, you might also be responsible if the products have your business’s name on them or if you’ve fixed or updated them. You could also be responsible if the company that made the product can’t be found or has shut down.
Benefits of Product Liability Insurance
These are benefits of PLI
Settlement
You depend on your product to make money, and you can’t pay for claims of product liability that could wipe out your income or even put you out of business. PL insurance gives you the money you need to settle cases about your products so you can keep your business going.
Lower Legal Cost
Product liability insurance lowers legal costs linked to a product, which boosts sales revenue. Potential customers will not buy from you if they are afraid of product flaws hurting customers, the cost of recalls, or safety issues that could cause products to fail and lead to PL claims.
When people are sure about buying your goods, they buy more of them, and you make more money.
Offers Protection
Manufacturers, distributors, retailers, and advertisers of goods can get product liability insurance to protect themselves from claims of harm or damage to property that their products or advertising might have caused.
Product liability insurance also covers claims of false advertising, express warranties, implied warranties, and service contracts linked to the product.
Provide Liability Coverage
Liability coverage for people who make, sell, market, or distribute products is provided by product liability insurance up to the policy limits.
Personal injury cases in relation to products include problems with how the product is design, make, label, or warn. They also include product failures that hurt people or damage property because of a flaw not found in the product that caused the failure.
Who Needs Product Liability Insurance?
Product liability insurance is essential for companies that make, sell, or ship goods. PL insurance is also a requirement for businesses and people who work in buildings.
Manufacturers
Manufacturers have product liability insurance to protect themselves from claims that one or more of their goods hurt or damaged people or property. The insurance protects against lawsuits from problems with the design, production, or other connected issues.
Retailers, suppliers, and distributors
Retailers, suppliers, distributors, and others in the supply chain can get product liability insurance. It is to protect themselves from lawsuits for damage their goods cause. It is possible to sue retailers even if they are not at fault for problems with the goods or how the customers use them.
This kind of insurance can also cover claims about problems with the product’s marketing. Such as labels that aren’t put on correctly or warnings about using or abusing the product.
It’s important to remember that stores can be sued even if they didn’t know they sold a broken item. Anyone in the product’s supply chain can be sued by someone who gets hurt by a faulty product or loses money because of how the product was used or not used.
The person who is hurt can also sue a store that don’t give enough warning or correct directions on using the product.
Tradespeople
Professionals in the construction industry, like general contractors and installers, need product liability insurance. This is to protect themselves from claims after they finish work and someone gets hurt or property is in ruins.
A homeowner could sue an HVAC professional if they install a heater that later breaks down and causes a natural gas leak that hurts or kills someone. The installer’s PL insurance would pay for their legal fees.
What is Covered in Product Liability Insurance?
Product liability insurance saves you from having to pay a lot of money to settle claims for:
- The harm done to people by your defective goods
- Property harm or loss caused by your faulty product
- Things you couldn’t have planned for, like product flaws that your quality control system missed
If you only sell the goods and don’t make it, you should be okay as long as you can show that:
- When the goods were sent to you, they were broken.
- You gave customers enough safety advice and warnings about how to use them correctly.
- You wrote down how to return broken items to the maker.
- Product safety, quality control, and returns are all handled by your supply contact with the maker.
- You have suitable methods for keeping track of things and controlling them.
What Isn’t Under Coverage
Product liability insurance usually tells you why the insurance company might not pay your claim or decide to renew your policy. This kind of reason is refer to as an absence. Some common types of exclusions that might be in product liability insurance are:
Recalls of goods
Most product liability insurance plans don’t cover the costs of inspecting, taking the product off the market, fixing it, replacing it, or not being able to use it after it has been recalled.
Exclusion from quality control
Insurance companies usually ensure that makers and distributors keep quality control standards. This is for their goods to ensure that people who buy or use them are safe.
Injuries to employees
Your product liability insurance wouldn’t pay for the costs of an accident to an employee caused by a flaw in the product. Employers buy workers’ compensation insurance to cover all costs link to their employees getting hurt and getting better.
Material exclusions
A lot of plans don’t cover certain goods or ingredients. If you make or sell a product with one of these materials or ingredients, your product liability insurance will not cover the claim.
Mishaps with third parties
We already discussed how general liability insurance would cover an injury to a customer or business partner on your land. Product liability insurance would not cover this.
Not required to report
If you don’t tell your insurance company about a new way to make a product, material, or ingredient, your product liability insurance will not cover it.
Exclusion of efficacy
Your product liability insurance will not pay for the claim if your product doesn’t do what it should.
Cost of Product Liability Insurance
Product liability insurance is usually in your general liability insurance coverage cost. How much the insurance costs is based on the dangers of your job and the limits of your policy. Because there are more risks, manufacturers usually have to pay more for product liability insurance. Certain factors affect the cost. These are:
Revenue: The amount of money a business makes usually determines how many lawsuits it can get. It determines how much the courts give in lawsuits.
Coverage limits: When coverage limits go up, the insurance company faces claims that could cost a lot of money, so the premiums go up, too.
History of the claim: When a business or product has a history of claims, the insurance company faces a higher chance of a lawsuit, which raises the insurance cost.
Location: The cost of product liability insurance is based on state insurance laws and the average losses in those states.
Industries: Pharmaceuticals and heavy machines, for example, have to follow stricter rules and get charge more often than other industries. As a result, companies in those industries have to pay more for product liability insurance.
Conclusion
If your business designs, makes or provides a physical object that is sold or give away for free, you might want to look into product liability insurance.
Your business can be charge if someone gets hurt or something gets ruin because of a wrong product.
Even though it’s not a requirement by law, makers, suppliers, distributors, or stores you do business with may ask you to have PL insurance. Besides that, you can be charge if one of your goods is discover to have caused harm, damage, or death.
