You’ve already done the hard part: creating a product people want. Yet whether it’s a quirky gadget that sparks instead of shines or a snack that unexpectedly bites back, products can lead to mishaps involving many people.
One accident doesn’t have to sink you! In a few steps, you can be covered, compliant, and confident. Product liability insurance is there to protect you when the unexpected happens.
Why Do I Need Retail Product Liability?
Even careful businesses have accidents. A candle cracks a countertop. A skincare serum causes a rash. A supplement label forgets to list an allergen.
Product mishaps can hit the supply chain like a pebble hitting the water: it has a ripple effect that impacts everyone else involved. Multiple people can be held responsible for an accident, from the manufacturer to the importer, to the distributor, and even the retailer.
That’s where product liability insurance steps in. It is designed to pay for injuries, property damage, legal fees, and other costs, so one claim doesn’t break your business.
What Product Liability Covers (and What It Doesn’t)
Product liability insurance can pay for a variety of incidents and claims, but some risks fall outside the scope of coverage. It’s important to know what product liability does and doesn’t cover so you can better protect your business!
| What It Covers ✅ | What’s Not Covered ❌ |
|---|---|
|
– Product-related injuries |
– Employee injuries |
|
– Legal defense costs |
– Product recalls |
|
– Manufacturing defects |
– Professional mistakes |
|
Property damage, llike: |
– Stolen products |
Pro Tip: Review and understand your limits, coverage, and exclusions. Contact our licensed agents for help bundling additional coverage so your policy works for your business’s needs!
Who Needs Insurance For Products?
Every business is responsible for putting a safe product on the market. It’s like a team effort of safety! This makes it crucial for each supply chain business to obtain its own liability insurance policy, like:
How Much Can I Expect to Pay For Product Liability?
Most businesses pay between $58 and $250 per month for product liability coverage with Insurance Canopy. To put it in perspective, coverage often costs less than a month’s worth of shipping costs!
Because no two products or businesses are the same, neither is the coverage. Your price depends on factors like what you sell and how you sell it:
- Product type: Handmade candles carry different risks than energy drinks
- Sales volume: More customers = more market exposure = higher risks
- Coverage limits: Many small businesses carry $1M / $2M in coverage
- Claims history: Fewer incidents can mean lower rates
- Sales channels: Amazon, retail stores, or direct-to-consumer each carry different requirements
If You Sell on Amazon (or to Retailers)
If you’re primed to sell products anywhere from A to Z, and make at least $10,000 in monthly sales, we see you, Amazon sellers! You’re currently required to have insurance that meets requirements like:
- Includes $1 million in general and product liability
- Has occurrence-based insurance
- Lists Amazon as an additional insured
- Offers a 30-day cancellation notice
- Issues a valid Certificate of Insurance (COI)
Retailers often have similar requirements before they’ll stock your products on their shelves or list them on their sites. Without the right insurance, you can miss out on these valuable sales opportunities — but with it, you can open the door to bigger opportunities!
5 Steps to Get Your Products Covered Fast
Insurance Canopy makes it quick and easy to get the coverage you need in five simple steps:
- Gather your product and sales info: Know what you sell, how much you sell, and where you sell it
- Pick limits that match your risks: Start with what platforms or retailers require of you and go from there
- Apply online with Insurance Canopy: A licensed agent will send you a custom quote within 24 hours
- Get proof of coverage: Review your quote, confirm your details, and make your first payment to activate your policy
- Download your COI: Instantly access your policy, add additional insureds, and show proof of insurance
Small Business Guide to Product Liability Insurance
Use this checklist to confirm your coverage before you launch, list, or ship your next product!
- Confirm your role in the supply chain
- List all products, ingredients, components, and suppliers
- Identify hazards and confirm compliant labels and warnings
- Choose limits that meet requirements and cover risks
- Document testing and certifications
- Gather all sales channels
- Add additional insureds
- Review exclusions and add additional coverage
- Create an incident response plan
- Maintain a yearly review of your coverage
FAQs About Choosing Product Liability Insurance
Do I Need Product Liability Insurance If I Just Resell or Dropship?
Yes, you need product liability insurance if you just resell or dropship. You can still be held responsible for damages or injuries arising from the products you handle, even if you didn’t manufacture them or cause the defect.
Is Product Liability Separate From General Liability?
No, product liability is typically included with general liability coverage; however, they can each carry their own limits. If you make or sell products, be sure to confirm your policy includes both types of coverage.
How Much Coverage Do I Need?
The amount of coverage you need depends on what you sell, where you sell it, and how much of it you sell, but most sellers are required to carry at least $1M per occurrence and $2M aggregate.
Your limits should match your business size, product type, risks, and coverage needs.
What’s a Common Product Liability Claim?
The most common product liability claims involve manufacturing defects, such as mislabeling, production defects, or missing warnings. These defects can lead to claims of burns, rashes, or property damage.
