Product Liability Insurance
Also known as: Product Liability, PL Insurance, Products Liability Coverage
Definition
Product liability insurance covers legal costs and damages if a product you manufacture, distribute, or sell causes injury or property damage to a consumer. It’s distinct from shipping insurance, which covers transit damage.
What Product Liability Covers
| Claim Type | Example |
|---|---|
| Manufacturing defects | Faulty wiring causes fire |
| Design defects | Product design is inherently unsafe |
| Marketing defects | Inadequate warnings or instructions |
| Breach of warranty | Product fails to meet stated claims |
Who Needs Product Liability Insurance
- Manufacturers - Making products
- Wholesalers - Distributing products
- Retailers - Selling to consumers
- Importers - Bringing foreign products to market
- Private label sellers - Your brand, someone else’s product
Coverage Components
- Defense costs - Legal fees to fight claims
- Settlements - Negotiated claim payments
- Judgments - Court-ordered damages
- Medical payments - Minor injury costs without litigation
Cost Factors
Premiums depend on:
- Product type - Higher risk = higher premiums
- Sales volume - More products = more exposure
- Claims history - Past claims increase rates
- Industry - Some industries have higher baseline risk
- Coverage limits - Higher limits cost more
Product Liability vs. Other Insurance
| Insurance Type | Covers |
|---|---|
| Product liability | Injury/damage from product use |
| Shipping insurance | Damage during transit |
| General liability | Slip-and-fall, general business risks |
| Carrier liability | Carrier’s responsibility for cargo |
E-commerce Considerations
- Amazon requires $1M product liability for most sellers
- Marketplace policies increasingly require coverage
- Importing products increases liability exposure
- Private labeling means you’re liable, not the manufacturer
Risk Reduction
- Quality control processes
- Clear product warnings and instructions
- Proper packaging to prevent damage
- Documented safety testing
- Quick response to reported issues
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