Product design, manufacturing, and sales can be tricky. As a business owner, you can do your best to ensure that the design is sound, t manufacturing is properly carried out to prevent product defects, and that the products are sold with any instructions and warning information necessary to prevent harm. You can never be 100% sure that nothing will go wrong however. That’s where product liability insurance comes into the equation. In this guide we discuss the average cost of product liability insurance.
How Much Does Product Liability Insurance Cost? Less Than $200/Month
The insurance business is all about playing the odds. They make the bet that the amount you pay in insurance costs will outweigh the amount they have to pay out. That’s the reason that everyone pays a different price for their insurance.
The insurance company assesses your specific product’s odds and decides on a price that would sway those odds in their favor. For that reason, the exact cost of product liability insurance fluctuates. On average though, a small business will pay $2,200 a year. In general, a company can expect to pay around 25 cents for every $100 of revenue dependent upon their product’s risk level. If your company makes a medical device for example, expect the liability insurance to be on the higher side.
So if your business is on the bigger side and earn lots of revenue, prepare to pay more.
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What Influences the Cost of Product Liability Insurance?
To ensure that your product liability insurance cost accurately reflects the risk of offering coverage, the insurance company considers several factors. First, they look at the industry you’re in and the kind of product you design, make, or sell. Some industries have higher safety standards or regulations.
If the product is low risk, like clothes, where not as many things can go wrong, then they won’t need you to pay as much to cover their risk. If it’s a high-risk product like power tools though, the likelihood of something going wrong is much higher, therefore so is the premium you’ll pay.
They also account for marketing and safety precautions. The state you operate out of and your claims history could affect the cost too. The price will also depend on your yearly revenue and the amount of coverage you get.
How Much Product Liability Insurance Do You Need?
The amount of product liability insurance you need depends on a few things. How many products you design, produce, or distribute along with the risk your product presents will affect how much product liability insurance you should have.
How profitable your business is and how much you can afford to lose should factor in as well. Generally speaking, try to get enough coverage to protect you from possible lawsuits, including covering legal fees, without getting too much more than you’re likely to need.
Do You Need Product Liability Insurance?
If your business is any part of a product supply chain, including design, manufacturing, making labels, performing alterations, or selling, then you should have product liability insurance. Many people are under the impression that only the manufacturer gets sued in claims like product defect or strict liability, however, that’s not necessarily the case. Many suits name every business from design to point of sale. It’s better to be safe than to be blind-sighted by a multi-million-dollar claim.
Product Liability Insurance vs General Liability Insurance
General liability insurance covers you in case of bodily injury and property damage. Product liability insurance (also called product recall insurance), on the other hand, covers you in the event that a lawsuit is filed due to a problem with a product. Since general liability insurance covers property damage and bodily injury and those are both common reasons someone might sue over a product issue, many assume that their general liability coverage will cover their product issues as well.
It often doesn’t cover these kinds of claims and even when it does, it isn’t designed to do so. If you don’t have product liability coverage than there may be gaps in your protection and you’re also going to have a lower limit for more issues.
Where Can I Find Product Liability Insurance?
First, be sure to check with your manufacturer to see if their policy covers you as well. If it doesn’t, seek out insurance from a reputable provider. While you can go to individual providers, it may be more time and cost-effective to use a comparison site like
Issues of insurance are complex. Not being properly covered can cost you profits or even your entire business if you’re not careful. It’s best to ensure you’re covered for every possibility than to lose everything in court. Play it safe and get product liability coverage.