What's product liability insurance?
What is product liability insurance?
Product liability insurance is a type of business insurance for companies that sell, supply or deliver goods. “Goods” can mean products, repairs or services.
What does product liability insurance cover?
This insurance covers third-party damages resulting from your product failure. “Damages” can mean injuries, psychiatric illness, property damage, economic loss and death.
What’s the difference between product and public liability insurance?
Both of these insurance types cover third-party damages. The main difference is that product liability insurance covers all product-related damages, whereas public liability insurance covers damages only when business negligence caused them.
Example: A product’s lithium-ion battery overheats and injures a consumer. The manufacturer’s product liability insurance covers the consumer’s damages.
The manufacturer is aware of several similar incidents but makes no effort to repair the defective batteries or issue a recall. Another consumer suffers an injury from an overheating battery, and the manufacturer’s public liability insurance covers their damages.
Does my business need product liability insurance?
Product liability insurance may be a wise investment for any business that sells or distributes products or services. Sole traders in particular may want to consider this type of cover, because in the event their product causes injury, they could be personally liable for damages.
How much does product liability insurance cost?
The cost of product liability insurance depends on several factors. The nature of your business has a big impact on the cost of your policy. If you manufacture a product that could cause injury or death if it fails — vehicle brakes, for example — your cover costs may be high.
Large companies with customers throughout Australia (and beyond) can expect to pay higher product liability premiums than sole traders with a handful of customers. This is simply because the level of risk correlates with the size and scale of the operation.
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