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What is Product Liability Insurance?

product liability insurance

Product liability insurance can save a business from unexpected costs, legal fees and penalties. As a general life insurance or health insurance compensates the loss with financial relief, the product liability insurance provides compensation to a company when its good causes harm to the customer due to a defective good or to the property of a client and they sue them in a court.

In that case, if you are manufacturing a product or delivering a product by buying from another company, somehow, it causes an injury to the user and you get a legal notice from that user who is going to sue you. As a result, you incur the legal cost of defending your product or you have to pay a penalty fee if the product proves defective.

These costs will be a burden on your finances and you need to plan these expenditures as a safety measure to ensure you meet the unexpected financial liabilities. In this blog, we will discuss what product liability insurance is and what it covers and compensates for. Moreover, we will discuss if your business needs product liability insurance. So, let’s start our discussion!

 

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What Is Product Liability Insurance?

Often, a company’s products can face challenges and they can be counted as liabilities to that company. To avoid these liabilities, a business can get the insurance of a product against any damage it could possibly cause as a result of a defect in it.

So, we can say that product liability insurance is compensation for a loss incurred to the manufacturer or the supplier of a damaging good. When a product causes harm or has injured someone by its use of the product, you could be sued by the injured person. On the other hand, if your product has damaged the property of a customer, you have to compensate for the loss to the property.

 

What Does The Product Liability Insurance Cover?

This type of coverage against any loss or injuries covers all the product-related legal issues, claims or penalties. It is possible your quality assurance team has failed to identify and rectify a defect during the manufacturing of the product. So, when a client purchased it, it damaged the property or harmed the person who was using it.

However, this product insurance covers the following:

  1. An injury to the person who purchased or used it
  2. Property damage caused by the use of your product
  3. Product defects you have not mentioned on your product or any other unforeseeable defects.

Eventually, the business has to pay for the loss if the customer sues you. All these legal fees and claims cannot be fulfilled at once. You need to plan for it beforehand. So that any haphazard financial measures can be avoided and you can meet the unexpected liabilities on time without the upside-down of your business finances.

 

Why Does Your Business Need Product Liability Insurance?

If you are manufacturing products with potential risks, you need to apply for the insurance of your product for protecting your business against any lawsuits. Similarly, if you are supplying products that are manufactured by another firm, you still need to get the insurance of the product to protect your business from product claims as penalties or compensations. Besides, the wholesalers and retailers are also required to fulfil the product liability insurance as they are selling the products and the customers are buying from them.

 

Final Thoughts

Product liability insurance is crucial to saving yourself and your business from any legal and financial liabilities as products can damage the property or the person who is using it. The damage can be minor or severe, depending on the damage and risk you can prepare your business for such lawsuits and compensate without disturbing the financial plan and budget of your business.

 

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Disclaimer: All the information provided in this article on Product Liability Insurance is general in nature. It does not intend to disregard any of the professional advice.