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1Accurate as of November 2023
You’re proud of the products you sell, and you want your customers to love them too – but if there’s a problem, product insurance can help. Product liability insurance is an insurance type that covers you against any costs if a customer takes you to court over one of your products.
However careful you might be, there’s always the risk of selling something that could cause injury or property damage. And even if a court decides you’re not to blame, you could still end up having to pay legal fees to contest a claim.
Product liability insurance works by covering all your legal fees if a customer takes you to court over a faulty or defective product you sold them. If you’re ordered to pay compensation, your insurance will cover those costs too.
Before taking out product liability insurance, it’s important to make sure you need this type of cover. If you’re legally responsible for the products you sell, product insurance is crucial – but not all businesses are liable. In most cases, you’re responsible for making sure your products are safe if you’ve manufactured them yourself, or if they carry the name of your business on them. You’re also liable if your products were made by another company, but you’ve repaired or refurbished them – it’s up to you to make sure they’re fit for the public. Finally, you might be liable if the original manufacturer has stopped trading, if they can’t be found, or if they’re based in another country. If you’re not sure if this applies to your business, it’s worth speaking to a financial advisor.
If you operate a restaurant or café, any food or drinks you prepare yourself count as a product – so you’re liable if someone gets food poisoning
Whatever it is your company produces, if it’s sold directly to the public there’s always the risk it could cause harm. That’s why it’s safer to get insured
Even if your company doesn’t physically make its own products, a court might find that someone was hurt by a flaw in the product’s design – leaving you legally liable
If the company that made a faulty product no longer exists or can’t be found, then the retailer might be legally responsible for its safety
You might be horrified at someone taking you to court over one of the products your firm produces. But sadly these things happen and unless you have insurance to protect yourself, the costs can run into the thousands. Product insurance can cover a wide range of industries from manufacturing to retail to catering, so compare policies to find the right one for you."
No, you’re not legally required to get product liability insurance. But if you’re legally liable for the products you make or sell, it’s something you should seriously consider. If a customer sues over a faulty product, you could have to pay costly legal fees, and even more if you’re ordered to pay compensation. But with insurance, your provider will cover these costs.
Product liability insurance can be especially useful for anyone who sells second hand products. If you repair or refurbish any products you sell, it’s likely you’ll be legally liable if they hurt someone. And even if you aren’t, retailers are usually responsible for a product’s safety if the original manufacturer no longer exists, which is always a risk with second hand goods.
Both product liability and public liability protect you against claims from members of the public, but they cover very different types of claim. Product liability covers you in case there’s something wrong with a product you sell. Public liability protects you against claims for other problems as a result of your business activity. For instance, a customer could becoming injured in your place of business.
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