Product liability insurance protects businesses if they are accused of creating, distributing, or repairing a dangerous product. A general liability insurance policy typically includes some product liability coverage, but businesses facing higher risks may need to increase their limits or purchase additional coverage. Product liability insurance protects a company in the event that a product it manufactured or sold causes harm. Claims for bodily harm or property damage can be brought by the product’s purchaser, user, or bystander.
The product may cause physical harm or damage as a result of the following:
Flaws in the design
Defects in the product.
Instructions, labels, and warnings are inadequate.
Almost any product has the potential to cause harm or damage to property. Food sold in a restaurant, for example, could make someone ill. A small toy that is not properly labelled could pose a choking hazard. A computer purchased online may overheat and damage itself. A mower repaired locally may malfunction and injure the user.
Photo by Mikhail Nilov
How should we compare product liability insurance quotes?
Each insurance quote will be slightly different, but it will be easier to compare quotes if they have similar coverage limits and deductible amounts. You can evaluate the quotes by reviewing the following areas:
Price. Quotes that are slightly over budget may still be viable, but those that are significantly over budget may need to be set aside.
Coverage limitations
The coverage limits may differ between quotes, but if you provided the same information during the quote process, they should be similar. A higher coverage limit is generally preferable, unless the cost is prohibitively expensive.
Deductibles
A higher deductible can lower your insurance premium, but you will be responsible for this amount if you file a claim. Choose an amount that will not put your company in a financial bind if the deductible must be paid.
Ratings
When buying insurance, make sure the company issuing the policy has the financial means to pay claims. According to the Insurance Information Institute, five independent agencies provide ratings on the financial strength of insurance companies: A.M. Best, Fitch, Kroll Bond Rating Agency (or KBRA), Moody’s, and Standard & Poor’s (or S&P). These agencies have different rating scales and may not always agree, but by comparing a few ratings, you can arrive at prevailing opinions.
