Liability Insurance Rates

One type of liability insurance that is critical to protecting a business is product liability insurance.

Product liability insurance covers a business against claims by purchasers who suffer injuries and losses from a business’s manufacturing or production flaw, design defects, or defective warnings or instructions on its products or services. Product liability covers medical costs, compensatory damages, economic damages, punitive damages, and legal fees and costs associated with a claim.

Manufacturing/Product Flaws

This is a product liability claim that some part of the production process produced an unreasonably unsafe defect in the manufactured product. The cadmium found in toys manufactured in China is an example of this type of claim.

Design Defects

Another type of claim is one that states the product is inherently unsafe. The Ford Pinto claims in the 1970s are an example of this type of claim.

Defective Warnings/Instructions

A third type of product liability claim is that the product was not properly labeled or did not have sufficient warnings for consumers to understand the risk. The claims against McDonald’s coffee purchasers for burns sustained due to coffee cups are an example of this type of claim.

The primary advantage of this type of insurance is that it allows a business protection in the event a consumer is successful in a claim against the company. Virtually all costs associated with a successful consumer claim are covered by this type of insurance.

Product liability insurance is also affordable. Premiums are determined by a company’s total sales of products. Consequently, premiums are only high if sales are high; if sales of products are down, premiums go down.

The downside to premiums being tied to total sales is that if a business does not produce enough total sales, it may not be eligible for product liability insurance. The threshold for many product liability insurance carriers is $28,000 per year. Nonetheless, if a business does not meet this requirement, it may still find coverage, but it will have to pay significantly higher premiums.

This is an essential type of insurance for any business that produces a product to the public. It protects the business against any potential consumer claims related to its products.

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