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What is Product Liability Insurance? 

All you need to know about product liability insurance 

Saarrah Mussa
Written by  Saarrah Mussa
Alicia Hempsted
Reviewed by  Alicia Hempsted
5 min read
Updated: 26 Mar 2024

If you design, sell or manufacture products, it may be worth protecting yourself in case those products ever cause harm to one of your clients and you are found liable for the damages.

What is product liability insurance? 

Product liability insurance is a type of business insurance that covers you for legal fees, compensation and other expense if a customer claims that your product or a product you have sold them has caused them any harm or resulted in an injury.  

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What does product liability insurance cover?  

Product liability insurance shields your business from financial blows if a customer claims they were injured or their property got damaged due to a faulty product you sold them, even if the product is not made or owned by you. Product liability insurance will help cover compensation costs as well as legal fees if a customer sues you – it can also cover the compensation amount if you are found liable.  

All policies are different, so to be sure of what you are covered for you need to read your policy carefully. Usually, if you are not the manufacturer of the products in question and you only distribute them you could get cover if:  

  • You were supplied faulty products. 

  • You have a contract with your manufacturer that includes details about quality control, product safety and being able to return faulty goods back to the manufacturer. 

  • The customer was given the correct safety instructions and warnings about misuse. 

Do I need product liability insurance?  

While product liability insurance isn’t a legal requirement, it is crucial to safeguard businesses that deal with designing, manufacturing or supplying products.  

Without the correct insurance in place, you could leave your business in a vulnerable position if a product you sell was faulty and injured or damaged someone’s property. In this case, your insurance will cover your legal fees and compensation costs.  

What does product liability cover protect you against?  

Product liability cover protects you against being sued if you supply, design, sell or manufacture a faulty product or a product that causes a client or their property any harm. It will cover you in the following situations:  

  • Injuries caused by a product supplied by you.  

  • Damage or loss of property caused by a faulty product. 

  • Product faults caused by manufacturer or unforeseen circumstances. 

There are instances where product liability may not cover you for and they include:  

  • Financial losses caused by your faulty product. 

  • Poor workmanship resulting in faulty products.  

How much cover do I need?  

The amount of cover you need will usually depend on the nature of your business. Most insurance providers offer cover that can pay out between £1 million and £5 million. You will need to assess how much your business could be affected by a lawsuit if things did go wrong and how much compensation costs could you be liable for in that situation.  

What’s the difference between product and public liability insurance?  

Public liability insurance refers to a policy that covers damages to a person or their property due to your business and its activities, this includes clips and falls or exposure to hazardous chemicals from your business. Product liability refers specifically to cover from any harm, damage or disruption, caused by a product you sell, use, design or manufacture, causes a member of the public.  

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