Skip to content

What's product liability insurance?

Find out what’s product liability insurance, what this form of business insurance covers, and why it’s important protection for many business owners and companies.

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. 

Keep your business running smoothly with MYOB

Starting a business is hard work. There’s a lot to consider, including which types of business insurance you need. But when you have all the foundations in place - your next step is to launch your startup and build it.

MYOB can help. Our online accounting software offers powerful solutions for your finances, invoicing, payroll and much more. Whatever your business goals, MYOB has you covered.


Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.

Related Guides