Product Liability Insurance

Being in the business of manufacturing, supplying or selling products brings with it its own set of risks. Having your product damage someone’s property or injure them could leave you with a hefty compensation bill to pay. That’s where product liability insurance comes in handy. By protecting you from the full force of these claims, you can keep more of your business’ funds intact.

What is product liability insurance?

Product liability insurance is designed to cover businesses for injury to a person or damage to property caused by the products sold or made by the business. Depending on the severity of the incident, businesses could find themselves liable for significant compensation or lengthy trials in court. Beyond this, though, business insurance as a whole offers valuable peace of mind that, should a covered event occur, your business can keep its doors open.

What does product liability insurance cover?

The main areas that product liability insurance covers are:

• Injury to a person or death caused by a product made or sold by your business
• Damage to someone’s property caused by a product made or sold by your business, including if it’s defective in certain covered areas
• Legal expenses as a result of having to defend a claim against your business in court
• Any compensation you’re ordered to pay as a result of being found liable for a covered event

The financial cover offered by your policy is adjustable, with limits of $1 million to $2 million often being available. You should cater the amount of coverage to the risks your business may be exposed to.

What does product liability insurance not cover?

Product liability insurance is only one piece of the puzzle. Here are some of the events that won’t be covered by your policy:

• Injury to your employees caused by a product made or sold by you (this is instead covered by workers compensation insurance)
• Product recalls due to a fault
• Liability arising from supplying any product containing asbestos
• Damage to your business’ equipment or stock caused by a product made or sold by you (this is covered by business contents insurance)

Is product liability insurance mandatory for my business?

No – product liability insurance isn’t mandatory by law for any businesses in Australia. You can still operate and sell your goods without having a policy in place. However, it leaves you open to significant financial loss if your business is subject to a claim and found liable for injury or property damage.

Do I need product liability insurance?

If your business sells or produces goods, product liability insurance can likely offer valuable protection for you. That means this type of cover casts a very wide net, and the below businesses are just a few examples of who can benefit from having a policy in place:

• Food businesses: whether it’s a large-scale operation in supermarkets across Australia or a small home baking business, there’s always a risk that something could go wrong when selling food. If someone gets sick eating the food you sold, you can be covered.
• Retail businesses: all kinds of shops need product liability insurance, as they can be held responsible if some of the goods they sold were faulty and/or caused damage or injury. This is still the case even if you didn’t make the product yourself.
• Wholesale businesses: when you’re buying or producing things on a large scale, you’re opening yourself up to greater risk as a business.
• Toy manufacturers: having children as a target market means you’ll have to be extra careful when it comes to manufacturing toys. The risk to children is such that, if a toy is faulty and able to be swallowed or cause damage through sharpened edges, companies can face swift and significant repercussions.
• Kitchenware companies: making and selling sharp objects certainly comes with its risks. If someone sliced their hand on a faulty mandoline or had a broken frying pan cause damage to their stove, product liability cover could help you out.

How much does product liability insurance cost?

The cost of public liability insurance is different for each business, as it’s based on variables specific to you and the risks you face. Here’s what will impact the cost of your policy:

• The nature and size of your business: in general, the industry you work in, the products you offer and the scale of the operation all factor into the cost of premiums. For example, a small online crochet business will almost certainly pay less than a large foundry supplying metal parts to industry buyers.
• Your business’ revenue: like how larger businesses are exposed to higher risks, those with higher revenue streams are also often considered at greater risk of having a claim made against them.
• Your policy’s inclusions and exclusions: what your policy does and doesn’t include will have a say in how much you pay. The more comprehensive your coverage is, the more you’ll be forking out. Plus, if you opt for some added extras, they’ll be added to your monthly premium.
• The sum insured: if your business opts for a larger cash sum limit for its coverage, you can expect to pay more for product liability insurance.
• Your insurance provider: ultimately, different providers have different criteria when it comes to how they assess businesses. That’s why it’s so important to compare your options, which you can do through Savvy.

We’ve partnered with BizCover to bring you a range of business insurance policies to help you compare them side by side.

What’s the difference between public and product liability insurance?

Public liability insurance is another type of cover that offers protection to businesses for claims of injury or damage to property caused by their negligent business activity. The table below shows the difference between events covered by product liability insurance and those included in public liability insurance:

Business insurance by state

NSW

VIC

QLD

SA

WA

TAS

NT

ACT