As a business owner, it’s your responsibility to ensure that the products you make and/or sell are safe for all. But this is can be a tall order when you are relying on third parties for ingredients, components etc., and even companies that take precaution after precaution can still end up creating or selling a product that results in harm. That’s where product risk insurance comes in. To protect yourself and your company in the event that your business produces or sells a product that causes injury or harm to another, product risk insurance is a must.
What is product risk insurance?
Product risk insurance, otherwise known as product liability insurance, protects businesses in the event that a customer purchases a product and the product causes bodily injury or property damage, leading to a lawsuit. In essence, product risk insurance covers a business should the use of a product result in third party bodily injury or property damage.
What are the types of risk in insurance?
The most common types of risks in product risk insurance are products that cause third party property damage like fire, products that cause bodily injury to the customers like rashes or allergic reactions, and products that result in sickness or death (usually food or beverages). There are many reasons that a product might cause property damage, bodily injury, or sickness, but three of the most typical are design defects, manufacturing defects, and contaminated ingredients or inproper assembly.
Who needs product risk insurance?
Purchasing product risk insurance is a wise choice for any business that sells products. Whether you own a bakery that sells fresh sourdough, a skin care company known for its all-natural formulas, or a retail boutique selling women’s clothing, your business could benefit from being protected against product liability claims.
What happens if I don’t have product risk insurance?
Without product risk insurance, your business would be left to face a lawsuit on its own. Lawsuits can be incredibly time-consuming, not to mention expensive. A bad enough lawsuit could lead to serious financial ruin and even bankruptcy as without product liability insurance business owners are left to pay their defence costs and any settlements or judgements out of their own pocket or balance sheet.
What is not covered by product risk insurance?
Product risk insurance does not cover property damage caused by your business’ employees or bodily injury incurred by your employees. It also does not protect against damages to third parties that are not related to the product you sell and manufacture. For example, if a customer has an allergic reaction to a lipstick you sell, product risk insurance may cover you. However, if a customer slips and falls on a wet floor while visiting your beauty boutique, product risk insurance does not cover as this this would be covered by other sections of a commercial general liability insurance policy and it’s important to note again that product liability aka product risk insurance is just one of four main coverages typically included in a standard commercial general liability policy for a company involved in making and/or selling products.