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If you’re in the business of designing, producing or distributing any type of commercial or consumer goods it makes sense to include product liability insurance in your package.

While heaviest overall responsibility is held by manufacturers, anyone along the chain can be held liable if a defective product causes injury or property damage - and the consequences can be costly.Having product liability cover in place could make all the difference if a claim for damages is made against your business.

What is product liability insurance

The European Union (EU) has stringent safety laws in place to help safeguard consumers from harm or damage caused by faulty or defective goods - if a product your business has manufactured malfunctions and causes injury or damage to a person or their property you may be held liable.

If your business is one of many involved in the manufacturing process - you supply component parts for a product, for instance - you could be held jointly liable if the product causes harm. Even if your business has not manufactured the defective product but is involved in the design or distribution process it could still be found liable under the following circumstances:

  • your business name is on the product
  • your business has changed, refurbished or repaired the product
  • your business has imported the product from outside the EU
  • you've distributed the product but can’t identify its manufacturer, or the manufacturer has gone out of business.

What does product liability insurance cover?

If your business manufactures products, having cover in place will protect you against successful claims for:

  • Personal injury
  • Loss of or damage to property
  • Unforeseeable circumstances such as defects your quality control system was unable to identify.

However, it may not cover you for:

  • Faults arising from poor workmanship
  • Financial losses to a person or business.

If your business distributes products, you should be covered providing you can show:

  • The product was faulty when it was supplied by the manufacturer
  • You warned customers about misuse of the product and gave them adequate safety instructions
  • You have good quality control systems and record keeping in place
  • Your supply contract with the manufacturer covers product safety, quality control and returns.

Of course, it’s best to try to avoid a claim at all costs, so a product’s safety should be accounted for at every stage - from design to distribution.

If you’re exporting products to countries outside of the EU, check whether there are any specific regulations or safety standards and make sure you adhere to them. 

What are the consequences of a successful claim for damages?

If your business is liable for damage or injury caused by an unsafe or defective product it can be sued for compensation.

If the product causes damage to a claimant's property, a claim could be brought against you. If found responsible, your business can be sued by anyone affected - even if they didn’t buy the product. In such cases, the cost of compensation is directly linked to the severity of the harm or damage done, with no upper limit.

While product liability insurance isn't a legal requirement, many businesses make sure they have cover in place to offset the cost of any successful claims for damages.

How to get cheap product liability insurance

Terms of cover can differ from policy to policy, so it’s important to make sure you run a thorough comparison of quotes and fully understand the policy wording and the specifics of what your business is protected against, as well as any exclusions.

Your insurance provider may require you to adhere to stringent quality control processes in order to validate your insurance policy. If so, you should ensure that you fully understand these processes.You should also make sure that you are aware of the risks that your product could pose - some products will have more inherent risks than others, and your policy should reflect this.

It's also important to consider that most businesses take out policies to cover them for compensation claims of between £1 million and £5 million.

Product liability insurance quotes

To get a bespoke quote for your business insurance cover, get in touch with Make It Cheaper Financial Services today. Our UK based insurance experts make it quick and easy for you to get a cheap business insurance quote – leaving you free to get back to running your business.

Click the 'get a quote' button below, or call 0800 144 4808, to get your no obligation quote.

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