An overview of product liability insurance

What is product liability insurance?

Product liability insurance covers the cost of compensating anyone who is injured by a faulty product that your business designs, manufactures or supplies.

Do I need it?

You should consider product liability insurance if your business designs, manufactures or supplies a physical product that is sold or given away for free.

Your business may be held legally responsible for any injuries to people or damage to property caused by a faulty product.

You can be held liable for faulty products even if you did not manufacture them. You may be liable for compensation if:

• your business’s name is on the product
• your business repairs, refurbishes or changes a product
• you imported the product from outside the European Union
• you cannot identify the product’s manufacturer, or the manufacturer has gone out of business

What product liability insurance covers

Product liability insurance protects you against the cost of compensation for:

• personal injuries caused by your faulty product
• loss of or damage to property caused by your faulty product
• unforeseeable circumstances such as product faults that your quality control system could not identify

Potential exclusions

• faulty products resulting from bad workmanship
• financial losses to a business or person caused by your faulty product

If you do not manufacture the product but you distribute it, you should be covered if you can show that:

• the products were faulty when they were supplied to you
• you gave customers adequate safety instructions and warnings about misuse
• you included terms for the return of faulty goods to the manufacturer
• your supply contact with the manufacturer covers product safety, quality control and returns
• you have good quality control and record-keeping systems

How do I get product liability insurance?

You can buy product liability insurance directly from an insurer or from a specialist broker through the British Insurance Brokers’ Association (BIBA). Most businesses take out policies that cover them for compensation claims of between £1 million and £5 million.

Product liability cover protects you in the event that your product causes injury or damage to a person or their property. You could be liable to pay compensation in these circumstances even if you didn’t manufacture the product, and the costs can be severe.

Read the article on what insurance options are available and why they are important for further information.