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What is Product Liability Insurance?

As a business owner, you want to be protected if something goes wrong, and having product liability insurance just might be that insulation you’re looking for. 

No matter how established or experienced a company is, accidents can happen. Without having the proper insurance to insulate you from those accidents, you could risk unexpected high expenses or worse. Having the right coverage doesn’t have to be costly, but it does have to be in place. Here’s what you need to know specifically about product liability coverage for your Lake Ozark business.

Demystifying Product Liability 

Before diving into product liability insurance, you must first know what the term product liability means. This term often feels like jargon or legalese. In the simplest form, product liability simply refers to a lawsuit that may be filed against an organization by a consumer due to a defect, which often leads to harm or injury.

Defects in products often stem from 3 core areas:

  • A poorly designed product
  • A mistake when manufacturing or constructing a product
  • Missed warning labels or improper instructions

Retailers are just as likely to be held liable for product defects as manufacturers. Even if you have good intentions and believe you have practiced great care when selling the product, there’s still a chance you could be held liable. Therefore, having product liability insurance is a must for all organizations.

Understanding Product Liability Insurance

If your organization is sued due to a defective product claim, product liability insurance will step in to protect you from financial penalties. These penalties include bodily injury, property damage, court fees, legal defense costs, and out-of-court settlements. 

Product liability insurance can be hugely beneficial, as these cases often take time and money. Even if your organization did everything by the books to protect consumers from harm, you still might be found liable to pay. Even if you are not found liable, the costs and expenses due to lost time and manpower could be costly. Having product liability insurance in place can help.

What Does Product Liability Insurance Cover?

When your organization uses product liability insurance, you’re covered in case a product you manufacture or sell causes any harm. This harm or these injuries are most often caused by one of the three main product defects mentioned above — design, manufacturing, or marketing. No matter the defect in the supply chain, your business will be covered under this insurance.

Product recalls are the one exception to this rule. If there is a product recall, you’ll need to purchase a separate policy to help cover operational costs and rebuild your reputation due to the recall. 

Does Your Business Need Product Liability Insurance?

You must carry product liability insurance if your business sells or distributes products directly to consumers. This includes Lake Ozark businesses that offer the following:

  • Clothing, either online or as a brick and mortar
  • Bakeries, coffee shops, or restaurants
  • Print shops
  • Pet supply shops
  • Wholesalers
  • Equipment suppliers

Even if you believe your product is low-risk, you must have product liability insurance. Any business can find themselves face-to-face with a product liability lawsuit. 

How Much Does Product Liability Insurance Cost?

Like any business insurance, the cost of product liability insurance can vary based on several factors, including manufacturing terms and conditions, location, and more. 

As a rule of thumb, you can estimate how much you can expect to pay by calculating $0.25 for every $100 in product sales your business does each year. For example, if you sell $100,000 in product sales each year, your organization’s product liability insurance would be roughly $250. That’s not a lot when considering that the average personal injury cases involving products are awarded $95,000. 

The Next Step in Getting Product Liability Insurance

We can help you better understand what your business needs regarding product liability insurance. Request a quote or set up an appointment, so we can review and discuss your business insurance needs and help you verify that you’re properly covered.