What Product Liability Insurance Does

Most business owners have probably heard about product liability insurance. The question is… what is it? What’s it for?

Product liability policies protect businesses against legal claims from persons who allege that they have suffered sickness, injuries, or loss because of the product that the business supplies.

In a product liability insurance policy, a “product” means any tangible item that is sold or given away. According to the Consumer Protection Act of 1987, the business that supplies or manufactures the products is liable for the damages that the product may inflict on the customer.

If a product causes damage, the supplier, not just the manufacture, can be met with a claim. An example might be… if you are the owner of a café, and the food you order from a vendor and serve makes someone sick, you can be sued as well as the manufacturer of the food.

The cost of a policy is determined by risk and the amount of coverage. The possibility of risk is determined by the product you manufacture or sell, how people you use it, and the types of warning labels or disclaimers on the product itself.

The important thing to remember is that product liability insurance does not give you a license to create inferior, low-quality products. As a supplier, look for a policy that protects you against low-quality manufactured products, indemnity costs, safety claims, and more.

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