Product liability insurance helps cover claims related to physical damages caused by products you make, distribute, or sell.
No one believes in your product quite like you (except for maybe us). You’ve tested it, tweaked it, and packed it with care. Yet even safe, well-made items can lead to harmful accidents.
Product liability is one of the smartest and safest ways to protect your products and the business you’ve built behind them (not to mention your peace of mind, too!). But what is product liability insurance, and is it right for you?
Products Liability Insurance Explained
Product liability insurance coverage protects your business from accidents involving your products and outside parties. If an item you made, sold, or distributed causes injuries or damages, this type of insurance is designed to help pay for:
- Medical bills
- Repair or replacement costs
- Legal fees and settlements
Did You Know?
The most common product liability claims we see involve manufacturing defects! These errors are often out of a seller’s or small business owner’s hands, but could still cost you a legal battle. Product liability insurance can cover these types of defense costs.
What Does Product Liability Insurance Cover?
Product liability insurance is intended to cover product-related claims, but like everything these days, there’s still some fine print around what it does and doesn’t cover.
| ✅ Covered | ❌ Not Covered |
|---|---|
|
Bodily injuries |
Employee injuries |
|
Damage to customer property |
Damage to business property |
|
Manufacturing defects |
Product recalls |
|
Design defects |
Wear and tear |
|
Marketing errors |
Contractual obligations |
|
Legal defense costs |
Environmental damages |
|
Mislabeling or failure to warn |
Intentional harm |
When shipments hit the fan, you’ll want to be sure you have the right protection in place! Product liability can cover:
- Bodily injuries: This may include rashes, cuts, bruises, allergic reactions, illnesses, choking, or death caused by using a product
- Damage to property: Think of colored dyes leaving a stain or a faulty screw leading to a dropping object that damages someone’s flooring
- Manufacturing defects: Can cover products not assembled properly, using contaminated or spoiled materials, not stored correctly, or having faulty packaging
- Design defects: Includes products with sharp edges, a lack of safety features, poor ergonomics, choking hazards, or dangerous designs
- Legal defense costs: Covers settlements and the cost to defend your business in court
- Mislabeling: This may include insufficient warnings, incorrect instructions, missing labels, faulty tamper indicators, or a “failure to warn”
- Marketing errors: Covers products falsely advertised, counterfeit items, exaggerated claims, unsupported research, or unauthorized use of a patented material
Remember, you’re still responsible for risk prevention and safe business practices. While product insurance can cover a lot of things involving your products, it can’t cover everything involving your business.
We recommend adding on other coverages to help expand your protection to things that product liability alone can’t cover (like employees).
Pro Tip: Learn more with our in-depth guide, "What’s The Difference Between General And Product Liability Insurance?"
Who Actually Needs Product Liability Insurance?
Any business that makes, sells, or touches a product before it reaches a customer needs product liability insurance! This includes (but is not limited to):
- Manufacturers
- Suppliers
- Importers
- Distributors
- Fulfillment centers
- Wholesalers
- Online sellers (like Amazon or Etsy)
- Retailers
- Indie brands
- Private label and white label brands
- Handmade goods sellers (like skincare or supplements)
Many business contracts require you to carry product insurance. If you plan on working with another company within the supply chain (or someone else to sell your products), you’ll need to secure product liability coverage first.
Quick Quiz: Do I Need Product Liability Insurance?
If you can answer “yes” to any of these statements, it’s time to consider product liability coverage!
- I make my own products, like candles, cosmetics, or pet treats
- I sell online through my own site and/or directly to customers at events
- I have an online storefront through a site like Amazon or Etsy
- I import or private-label products from other countries
- I package and distribute products for other brands
- I stock and sell products that I did not make myself
- I mass-manufacture products for sale
- I have my products made elsewhere before selling them on my own
- I work with companies to sell my products in stores or subscription boxes
Real-Life Product Liability Claim Examples
Your product might be safe 99.99% of the time, but what about the one percent that it’s not? Bad things happen even to great products, and product liability claims can be detrimental without insurance.
- A customer is injured when a glass bottle shatters in their hand. You sold the bottle, but didn’t make it, yet you’re being asked to pay for the customer’s medical bills.
- A defective batch of soap you imported causes multiple allergic reactions. Even if the error was due to mislabeling, you’re still pulled into the lawsuit.
- An electric bike battery you distribute overheats after being on the display charger for too long. It starts fires at multiple retail locations, and you’re being billed for the fire damage repairs.
- A shipment of frozen pre-packaged meals you manufactured leads to food poisoning. You learn the distributor didn’t properly store the food, leading to spoilage, but you’re still named in a lawsuit.
- You unknowingly installed a faulty hanging wire on several of your art pieces. An interior designer buys them for clients’ homes, but the wire later gives way. Bills are now piling up for the injuries and damages that clients sustained.
Did You Know?
In 2013, U.S. courts saw 3,342 product liability cases. By 2022, that number jumped to 5,826. This rise shows an increased awareness of consumer protection law and an increase in taking legal action against businesses when something goes wrong.
Why Product Liability Insurance Matters to YOU
Here’s the thing: your business can be sued just for being involved with a product in some way. That includes selling, designing, supplying, importing, storing, distributing, creating, or delivering a product.
The supply chain really leans into the “chain” aspect here. Any involvement with a product ties your business to it. So if anyone in that chain does something wrong, the entire chain can go down. For example:
- The manufacturer who made a product
- The importer who brought it into the U.S.
- The brand that put their label on it
- The distributor who shipped it
- The seller who listed it online
- The small business owner who sold it
How this affects you: You could find yourself in the middle of a lawsuit with several other businesses. If you don’t have the right coverage, you could expect to see a costly legal bill.
The good news: Product liability insurance gives you the support to pay for lawsuits, even baseless ones, so you can focus on growing your business (not defending it).
How Much Does Product Liability Insurance Cost?
On average, most small businesses pay between $58 and $250 per month for product liability insurance with Insurance Canopy. Your exact price depends on a couple of factors, like:
- What kind of products you sell (import vs private label)
- How much revenue your business earns each year
- Your business type (small-batch maker vs. mass manufacturer)
- Your past claims history
- Where and how you sell (online, at events, or in-store)
- Coverage increases to meet contract requirements
- Optional insurance add-ons
Questions?
Our team of U.S.-based licensed agents is here to help. We shape every policy around your products, so you’re protected where it matters most. Apply today to get a custom quote in as little as 24 hours!
Product Liability vs. General Liability: Do I Need Both?
In most cases, yes, you need both product and general liability coverage to be fully protected (especially if you’re making sales online and in person).
These are two separate coverages used in different situations:
- Product liability covers harm caused by your products
- General liability covers harm caused by your business operations
Product liability covers you for the items you make, ship, or sell, and it covers you even after a product has left your hands. It’s often required by retailers, online platforms like Amazon, or other businesses you partner with.
General liability covers you for accidents on your business property, like an office, event space, or a customer’s home (we see you, mobile business owners!). It can also cover damages caused by your day-to-day operations. You typically need it when you attend events, rent a space, or land a contract deal.
Pro Tip: You’ll commonly find product liability and general liability offered on the same policy, making it easy to protect both your products and your business under one plan!
How to Get Product Liability Insurance in 5 Simple Steps
With Insurance Canopy, we’ve streamlined the process so you can protect your business without the stress. Whether you’re selling online, in stores, or both, we’ll help you get the coverage (and confidence) you need to grow.
Here’s what the application process usually looks like:
1. Share basic business details
Where are you located? Who’s the business owner? How much do you make in a year?
2. Tell us about your products
What do you sell? Where do you sell? What are the product ingredients?
3. Choose your coverage limits
Let us know if you need a policy that specifically meets marketplace or retail requirements.
4. Receive a custom quote
You’ll get a personalized quote in as little as 24 hours! You can then work one-on-one with an agent to tailor your policy as needed.
5. Buy online and get your COI
Once the coverage details are finalized, you can securely pay for your policy online. Your agent will send a Certificate of Insurance (COI) straight to your inbox (and can modify wording as needed for named parties on the policy).
Start your journey to peace of mind (and protected products) today! You can apply online for a free custom quote in minutes — our agents are standing by, ready to help you.
Common Questions About Product Liability Insurance
Do I Need Insurance to Sell Products Online?
Yes, you need insurance to sell products online. Even if you’re only selling through your own website, you can still face claims if your product causes injury or damage.
Many platforms, such as Amazon, require proof of product liability insurance to list or keep your products live. Others like Etsy strongly encourage it and often exclude product liability coverage as a guaranteed seller protection (making it crucial for sellers to get it on their own).
Who Is Legally Responsible for a Product-Related Injury?
Anyone in the product’s supply chain can be held legally responsible for a product-related injury. You can still be sued if something goes wrong, even if you’re not directly at fault.
All businesses that play a role in a product’s supply chain, including retailers, wholesalers, distributors, importers, and private labelers, can be named in a lawsuit. Product liability insurance helps cover your legal defenses related to these types of claims.
Is Product Liability Insurance Required by Law?
No, product liability insurance is not required by law. However, many major retailers, online platforms, events, and business partnerships require it. If you sell through Amazon, Target, and Walmart, you’ll need it to show proof of insurance.
Even if the law doesn’t require it, your future business partners for manufacturing, shipping, distributing, importing, or selling might. Getting product liability coverage shows you’re a serious product owner and ready to play in the big leagues.
What Industries Need This Type of Coverage?
Any industry that creates, sells, or distributes physical products needs product liability coverage. Industries most commonly asked to carry product liability insurance include:
- Skincare, cosmetics, and handmade beauty products
- Supplements, vitamins, and CBD (cannabidiol) items
- Food, beverages, and pet treats
- Fitness gear and wellness tools
- Home goods, 3D printed items, and cleaning supplies
- Toys, apparel, and sporting equipment
- Imported, private label, or e-commerce goods
If your product ends up in someone’s hands, on their skin, in their body, or around their home, product liability insurance is a smart consideration.
Kyle Jude | Program Manager
Kyle Jude is the Program Manager for Insurance Canopy. As a dedicated program manager with 10+ years of experience in the insurance industry, Kyle offers insight into different coverages for small business owners who are looking to navigate business liability insurance.
Kyle Jude is the Program Manager for Insurance Canopy. As a dedicated program manager with 10+ years of experience in the insurance industry, Kyle offers insight into different coverages for small business owners who are looking to navigate business liability insurance.
