Product Liability Insurance Insurance Basics

Product Liability Insurance is designed to protect businesses from financial losses arising from claims related to the products they manufacture, distribute, or sell. Here are the basics of product liability insurance:

Coverage

• Bodily Injury: Covers medical expenses and compensation for injuries caused by the product.
• Property Damage: Covers damage caused to other property due to the product’s defect.
• Legal Costs: Covers legal fees and costs associated with defending against liability claims.

Policy Limits

• Per Occurrence Limit: The maximum amount the insurer will pay for a single claim.
• Aggregate Limit: The maximum amount the insurer will pay for all claims within a policy period.

Exclusions
Policies typically exclude coverage for:

• Intentional misconduct
• Claims arising from products that have been altered or misused
• Claims for professional services or advice (see Professional Liability)
• Certain types of damages, like punitive damages

Premiums
Premiums are determined based on factors such as:

• The type of products you manufacture or sell
• Gross sales
• The risk associated with the products
• Your company’s claims history

Claims Process
If a claim is made:

1. Notification: Inform your insurer as soon as you become aware of a potential claim.
2. Investigation: The insurer will investigate the claim and assess liability.
3. Defense: The insurer will typically provide legal defense and negotiate settlements.
4. Settlement: If the claim is valid, the insurer will pay up to the policy limits for damages.

Importance- Why do you need it? 

• Financial Protection: Helps cover the costs of legal defense and settlements, which can be substantial.
• Risk Management: Demonstrates a commitment to managing product safety and consumer protection.
• Business Continuity: Protects your business from potentially devastating financial losses and reputational damage.

Obtaining Coverage
To get product liability insurance:

• Assess Your Needs: Consider the type of products you offer and their associated risks.
• Choose a Reputable Insurer: Look for insurers with experience in your industry.
• Review Policy Terms: Understand coverage limits, exclusions, and conditions.

Understanding and maintaining appropriate product liability insurance is crucial for protecting your business against potential legal and financial repercussions related to product defects. If you have any questions, please feel free to contact me. 

Jason Matison
Commercial Insurance Agent
​Austin, Texas