Small business owners need a carefully planned insurance strategy to ensure their assets are protected. For those who make, sell, or distribute consumer goods, product liability insurance is a vital part of their business safety net. This coverage provides funds for legal fees and penalties if a consumer is injured by one of your products. However, these policies do more than pay out when things go wrong. Here are some of the other features included in product liability insurance.
Different Types of Coverage
What does product liability insurance cover? It includes financial protection for lawsuits linked to injuries incurred by:
- A defect in the manufacturing process.
- Flawed product design.
- Lack of warning labels or caution notices.
These 3 levels of protection make product liability coverage essential for any business involved in the production, design, or distribution of retail goods.
Don’t Depend on General Liability Alone
Some business owners believe their general liability coverage is all the protection they need. While these comprehensive policies do provide important coverage, it may not be enough to cover all of the costs associated with a product liability claim. Some of the often overlooked costs associated with these types of claims include:
- Lost productivity time while investigations and inspections are conducted.
- Testing and laboratory fees.
- Lost profit potential due to recalling potentially dangerous products.
- Cost of repairing the problem that caused the initial issue.
These costs can add up more quickly than you think. Adding more coverage ensures you’ll have enough to rebuild your business after an expensive legal fight.
Product Liability Insurance – The Key to a Successful Defense
In order for a product injury claim to be successful, it must fulfill four criteria. Courts must establish that the product contained a dangerous defect, it caused injury to the plaintiff, the injury occurred while the product was being used for its intended purpose, and that the product was not altered or changed after purchase.
Good legal representation is expensive. A product liability policy helps pay for your legal defense. For small businesses, these policies can make the difference between meaningful and effective representation and less savvy legal teams that cost less but can’t win your case.
Other Things You Didn’t Know About Product Liability Insurance
- Even if you weren’t directly responsible for the injury-causing problem, you can still be held liable. That means you probably need more coverage than you think. Talk to your insurance agent to make sure you’re fully covered.
- If your product liability policy doesn’t completely cover your costs, an umbrella policy provides extra coverage to fill in the gaps and protect more of your personal wealth.
- Importers and logistics companies are often held liable for problems that may have occurred during transit. Product liability insurance helps defray the cost of problems related to goods damaged in shipping.
How can product liability insurance fit into your business insurance strategy? Talk to your insurance agent for a more personalized assessment of your insurance needs.