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What is product liability insurance?

  • Blog
  • 04 August 2017

Product liability is an essential type of business cover to protect many companies operating in the UK. But what exactly is this form of insurance, does your business need it, and what does it, and does it not, cover?

This blog post aims to help explain the key things to know about product liability insurance.

What is product liability insurance?

Explaining product liability cover

This type of insurance is concerned with the products your business sells. If one of your products causes a customer to become ill or injured, or causes damage to their property, this cover protects you and your company. It covers you for any claims that customer might make against you, like compensation costs or legal fees, regarding the product you’ve sold to them.

This could include different types of products, like some food you’ve sold in your cafe that leads to a bout of food poisoning, or a toy you’ve manufactured that injures a child. It could also be a washing machine you’ve supplied that floods a customer’s kitchen.   

Do I need this insurance?

Product liability cover is recommended if your business designs, manufactures, or distributes products for sale or free of charge. You can be held liable for a faulty product that you supply, even if you don’t manufacture it.

You can also be held responsible if:

  • Your business’s name is on a product
  • Your company repairs, refurbishes or changes a product
  • The product you sell is imported from outside the European Union
  • You’re unable to identify the manufacturer of the product you sell, or they have gone out of business

It’s also worth noting that things can go wrong, even with the safest of products. Personal injury claims can be very expensive, so it’s better to be safe, and make sure you’re covered, than be sorry, and worry about having the finances to pay out for compensation or legal fees. If something does go wrong with one of your products, with this insurance you can feel confident knowing that you’re protected.  

What does this insurance cover?

The main things that product liability insurance covers is protection against compensation for:

  • Personal injury, caused by your product
  • Loss of or damage to a property, caused by your product  
  • Unforeseeable circumstances, like product faults that weren’t identified by your company’s quality control system

What if you distribute, but don’t manufacture, your products?

If you have sold a faulty product that you didn’t manufacture, you should be covered if you can show:

  • The product was faulty when it was supplied to you
  • You gave your customers adequate safety instructions about the misuse of the product
  • You included terms with the product about returning faulty goods to the manufacturer
  • The supply contract you have with the manufacturer covers product safety, quality control and returns
  • Your business has good quality control and systems for record-keeping 

What might this insurance not cover?

Depending on the level you choose, there are different things that your product liability insurance might not cover. This includes:

  • Faulty product that are the result of bad workmanship
  • When your faulty product has caused financial losses to a person or business

Helping you with product liability and other business cover

Public liability cover is just one of many key types of business insurance, which should be considered for your company if you design, make or supply products for your clients or customers. To learn about other types of cover you might need to consider, please read our blog, What sort of business insurance do I need?

With every type of insurance there’s a lot to consider, like what’s a priority for your company and what level of cover will be the most effective. So we provide an insurance service to help you make the best business decisions and give you peace of mind.

The service, which is available to all FSB members, includes access to:

  • A team of expert insurance advisors to help find you the most suitable policies, saving you time and money
  • Free claims advice, no matter how complex
  • Higher levels of insurance cover for your business, where possible

If you would like to find out more about this service and how it can help you, please visit our FSB Insurance Service web page or get in touch with our experienced team.

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