Product liability insurance covers the cost of compensating anyone who is injured by a faulty product that your business designs, manufactures or supplies.
Do I need it?
You should consider product liability insurance if your business designs, manufactures or supplies a physical product that is sold or given away for free.
Your business may be held legally responsible for any injuries to people or damage to property caused by a faulty product.
You can be held liable for faulty products even if you did not manufacture them. You may be liable for compensation if:
- your business’s name is on the product
- your business repairs, refurbishes or changes a product
- you imported the product from outside the European Union
- you cannot identify the product’s manufacturer, or the manufacturer has gone out of business
What it covers
Product liability insurance protects you against the cost of compensation for:
- personal injuries caused by your faulty product
- loss of or damage to property caused by your faulty product
- unforseeable circumstances such as product faults that your quality control system could not identify
Product liability insurance may not cover you for:
- faulty products resulting from bad workmanship
- financial losses to a business or person caused by your faulty product
If you do not manufacture the product but you distribute it, you should be covered if you can show that:
- the products were faulty when they were supplied to you
- you gave customers adequate safety instructions and warnings about misuse
- you included terms for the return of faulty goods to the manufacturer
- your supply contact with the manufacturer covers product safety, quality control and returns
- you have good quality control and record-keeping systems
Buying product liability insurance
You can buy product liability insurance directly from an insurer or from a specialist broker through the British Insurance Brokers’ Association (BIBA). Most businesses take out policies that cover them for compensation claims of between £1 million and £5 million.
For more information on business insurance see the ABI guide to insurance for small businesses (pdf 466kB).