The Risks and Costs of Product Liability Insurance for Small Businesses


Once a new business has been launched, a number of things could go wrong. Liability insurance is one way to protect against legal costs associated with these issues.

Your liability for any injury caused by your products may depend upon whether they’re defective. For instance, if your firm makes tools that injure people, then your liability might depend upon whether your tools were defective.

You or your business may be liable for any damages caused by the products if they’re used incorrectly. The potential costs of litigation make it important to purchase commercial general insurance policies.

A product liability insurance policy protects an owner from claims

If you sell products, you need product liability insurance to protect your company if a customer sues you for injuries they sustained because of one of your products.

If you don’t carry products liability coverage, your company may be liable for any injuries caused by defective products.

What Does Product Liability Insurance Cover?

Product Liability Insurance (PLI) protects against legal expenses, medical bills, and compensation for injuries that result from your products.

PLI provides coverage for any type of injury related to your products, including physical harm, property damage, personal injury, and wrongful death.

What products liability insurance doesn’t cover

Liability Insurance protects against lawsuits for physical injuries from accidents involving your business’ products. It doesn’t protect against lawsuits for damages resulting from software, apps, IT or technical products.

For example, product liability insurance doesn’t cover code bugs and software glitches that cause financial harm to clients. You need E&O insurance for tech-based issues.

  • Products sold by third parties (such as Amazon) are not covered under product
  • Product recall costs
  • Employee injuries
  • Slip-and-falls involving customers, such as slips and falls at retail stores

Determining The Amount of Product Liability Coverage

The amount of product liability coverage you need will depend on factors like the industry you’re in, where you’re located, how much revenue your business brings in, and your claims history.

If your products are more hazardous or if you’re selling them in an area where people are more likely to sue, you might need to carry higher coverage limits.

Make sure that the amount of coverage you have is appropriate for the amount of exposure your business faces.

Things that will affect this include the type and amount of product you’re selling, how many sales you make, and how many people are involved in the production and distribution of your product.

How much product liability insurance costs depends on several factors, including the type of business you conduct

The average annual cost of product liability insurance for small business owners is $1,192 per year.  This amount varies depending on the type of business.

For example, manufacturers have an average annual cost of $1,200, with a range from $750 to $2,000. Average premiums for wholesale businesses ranged from $771 to $4,500.
Factors affecting the costs of product liability insurance include things like: Your business location, claims history, and policy limits.

Your product risk type affects insurance cost

One of the most important factors influencing the cost of your business’ commercial general (CGL) policy is the type of products your company manufactures, sells, or services. These products vary widely in their risk of causing physical harm to others.

Companies selling safer products, such as office supply and stationary, have lower premium costs. Higher-risks products include furnishings, electronic devices and bicycles. But the most risky items are foods and beverages and items used by children. These items will typically have the highest rates for liability coverage under the policy.

If you’re selling products on Amazon, you need product liability insurance

Small business owners who sell their products online need insurance for e-commerce and online retailers to be protected from product liability.  An agency such as Sadler & Company can help U.S.-based business owners obtain free quotes for their own personal property damage (PD) and general commercial (GC) coverage from several different insurers and can get you the best rate.

Where to Get the Best Product Liability Insurance Online

You can buy product safety coverage as an add-on to a general business policy. This basic level covers small businesses with low product risk.

If you choose to go with the second option, you’d need to buy a stand alone product liabili­ty insurance poli­cy.

General Liabilities Insurance” covers property damage caused by an insured party (you) during the course of their business operations. It doesn’t cover product liability.  You need product liability insurance for any business that sells products.

Here are some things to consider when buying products liability insurance

When buying products liability insurance, it’s important to consider the potential risks involved with your product. What kind of damage could it cause? How many people could it potentially hurt?  A products liability insurance specialist such as SADLER can help you get the right type of policy for your type of business at the best rate possible.

These are just a few of the things you need to think about when choosing products liability insurance. Make sure you have all the facts before making a decision.