Product liability insurance provides cover for people who manufacture, distribute or sell and protects you any resulting financial damages.
It is often bundled with public liability cover.
Product liability claims can occur for a variety of reasons from spoilt food that makes someone sick all the way through to a faulty camera that injures a customer.
Get quote for business liability insurance
What is product liability insurance?
Product liability insurance is a type of product insurance designed for businesses that provide goods and services to people in exchange for money. It can make sure you are protected if the products you sell directly or indirectly cause harm to anyone.
You could be providing products to end users, such as in a retail store, or using products to fulfil your service, such as a plumber installing bathtubs. If that product was to make someone ill, injure them or worse, and you became liable, product liability insurance can protect you from the financial repercussions.
How much is public liability insurance?
The cost of your product liability cover depends on your unique circumstances. The insurer will work out a quote based on how likely they think they'll be on the hook for a claim related to the products you sell.
Your cost could be anywhere from a few hundred to tens of thousands of dollars per year, based on the following factors:
What types of products you sell. Someone selling pillows is likely to pay less than someone selling hunting knives, all else being equal.
How many products you move. The higher the volume of products you sell, the more likely someone could get injured and the higher your premiums will be. It's a numbers game.
Where you are in the product chain. A retailer is less likely to be at fault than the manufacturer would be for a faulty item, meaning retailers would pay less as far as that goes.
The structure of your policy. You can decrease the cost of your policy by choosing higher out-of-pocket costs (excess) and lower benefit limits, and vice versa.
Your claims history. If you've been found to be at fault for product damages in the past, you're probably going to pay more than a similar business that hasn't.
What does product liability insurance cover?
Product liability insurance coverage can protect your business against a wide range of scenarios including:
Personal injury and illness. If a customer is harmed as a result of your product. For example, if a product malfunctions and injures someone or a food or vitamin product makes someone ill.
Property damage. If your product damages someone's property. For example, a faulty pipe damaging a home.
Software damage. If a product of yours damages software. For example, malware damaging computer systems.
Do I need product liability insurance?
While it's not mandatory, product liability is strongly encouraged for businesses involved in the life cycle of a product. This can include parties that are directly or indirectly responsible for the damage. Here's who it could include:
Designers, engineers and developers
Parts suppliers
Product manufacturers
Importers, distributors and wholesalers
Brands who use only their name to sell products
Retailers
Installers
As you can see, many people could be liable for a faulty product. That's because lawyers will try
to determine who's responsible for the product failure and that blame does not always lie with the same party. For example, an electrician installing a power point in a home may not have created or imported the products used but they could still be liable for claims if they didn't install them properly.
Did you know?
The number of public and product libablity claims in 2019 was 31,539, 2% increase compared to 2018 Read more statistics here.
What isn't covered by product liability insurance?
Situations where your policy won't cover product damage are called exclusions and every policy has them. Below are some common exclusions you'll find in most policies. Make sure to read the policies you are considering carefully in case there are any small differences that could have a big impact on you. Some situations where you probably won't be covered by product liability insurance:
The product contains asbestos
You've signed a contract with someone that holds you liable, where otherwise you wouldn't be liable by law
The product has faults that you knew about before you got cover
Your faulty product keeps someone from being able to use their undamaged property.
The costs are related to you fixing a faulty product that someone returns
You own the damaged property or the damaged property is in your care
The cost is related to any guarantee or warranty you've offered on the product
The cost is related to recalling an item (unless you've added the special recall cover as an add-on)
The cost is related to the loss of electronic data
What's the difference between public and product liability insurance?
In a nutshell, product liability insurance is a subset of public liability insurance. It covers you when it is your product that causes the harm. Public liability on the other hand, is a little broader. It protects you from lawsuits that may not necessarily be related to the products you provide. For instance, if you are a store owner and someone comes in to use the bathroom and slips, public liability would protect you in case of a lawsuit. Check out the examples for further clarity.
Product liability
The damage happens because of a product you made or sold. Example: You're a bicycle shop owner and you sell someone a bike with an overinflated tyre that pops and causes them to crash.
Public liability
The damage happens on your premises and is unrelated to your products or direct service offerings. Example: You're a bicycle shop owner and someone slips on some gear grease that had been spilt on the shop floor.
Product liability insurance is often covered under a public liability insurance policy or bundled together. You may find that they have different types of coverage limits. For example, your public liability policy may have an unlimited number of claims per year that it will cover you for, while your product liability is more likely to be capped at a certain dollar amount. If you think about it, public liability has to cover you for a lot more than just your products, so it makes sense that product liability cover is often slightly smaller.
Want to avoid a claim? Here are a few tips
While you could receive a benefit in a claim, it's often better to avoid the hassle of making a claim in the first place.
As we've seen, blame for a faulty product can lie anywhere along the chain of businesses that ultimately get that product to the customer. Here are some tips that will help you avoid a claim, wherever you are in that chain:
Think safety first. Make sure product safety is central to the company's operations.
Don't break the law. When designing, manufacturing and selling products, make sure you follow all relevant legal guidelines related to safety.
Give clear warnings and instructions. Place the appropriate warnings on your products (such as age limitations) and make sure the usage instructions are written clearly.
Maintain quality control. Have a system in place that allows you to detect imperfect product units.
Train the sales and marketing teams. These teams should be able to explain how the product works, how to use it and if it poses any safety risks. They can also serve as a field service that can detect trends, identify potential hazards and help resolve safety concerns before they blow up.
Maintain vigilance in the supply chain. You can be responsible for faulty parts, especially if the part supplier is overseas. Make sure all parts adhere to design specifications.
Have a legal team in place. Make sure your legal team is familiar with rules and regulations surrounding your product and what you are and aren't responsible for regarding how customers use your product.
Keep good records. If you've taken great care to design, manufacture and sell your products, courts and juries should respond favourably to documentation that proves this.
Talk to a broker about product liability insurance
If you are ready to speak with a consultant about different business insurance options available, simply enter your details in the form. Keep reading if you want to learn more about the different types of cover available.
Frequently asked questions
Along with choosing the lowest priced cover, you'll want to make sure you're not giving up anything important. Once you've found a few quotes for policies within your budget, you'll want to take a close look at the differences.
Here are some tips to help you home in on the right policy for you:
Is the insurer strong financially?
You don't want your insurer going bankrupt mid-claim.
How is the customer service?
Check some online reviews and see how others describe their experiences with the insurer.
Do they have a wide selection of products?
Business insurance consists of many types of cover. Make sure your insurer offers the selection you need.
Is the insurer flexible?
If your business is constantly changing or poised to grow, you'll want an insurer that can adjust your policy on the fly to accurately reflect your business conditions at any given time.
What is the claims process like?
Make sure you're happy with the claims process including any time limits for claiming, the time it takes to decide on a claim and to pay it, the number of steps involved in making a claim and what support is available during the claims process.
Are there any additional benefits?
Check to see if the insurer offers any other benefits. For example, some insurers will offer loyalty discounts for customers who've been with them for a number of years.
What isn't covered?
Every insurer has a set of situations listed where they won't pay a claim. Most of these will be similar from insurer to insurer, but there may be small differences that have big implications for some businesses. Read these exclusions carefully.
Remember that a broker will already know all of this and help walk you through the comparison process if you decide to go that route.
Although it's probably not a good idea to cut corners just to save a buck or two on product liability insurance, there are still ways you can save some money. Here's how:
Use a broker
A broker knows all the ins and outs of business insurance and has relationships with multiple insurers. You tell them what you need and they'll seek out the best fit in terms of value and cost. Using a broker may not only save you money, it may also save you a lot of time going from insurer to insurer yourself.
Increase your out-of-pocket expenses
This is called your excess, or the amount you agree to pay for each successful claim. The more you agree to pay, the more your premiums go down. Just make sure it's an amount you're comfortable paying should you ever need to claim.
Decrease the amount you're paid per claim
These are your benefit limits. The less your insurer has to pay you (or the person suing you), the more you can save on premiums. Remember that lawsuits can be very expensive and put you on the hook for hundreds of thousands or even millions of dollars, so make sure you understand the risks of reducing your cover too much and speak with your broker or insurer if you are unsure.
Get a bundled deal
Product liability is one of many types of business insurance and it's almost certain you'll need a few more (building and contents, theft, professional liability, etc). Business insurance is highly customisable, so it makes sense to go through only one insurer who can customise the perfect solution for you. You'll probably get a discount for going this route.
You can deduct the costs of product liability insurance from your taxes because they are considered a business expense. Your broker or insurer will send you a tax invoice each year, depending on who sold you the policy.
While both public liability and professional indemnity insurance are designed to protect professionals and/or business owner, both types of cover have some key differences to be aware of.
Professional Indemnity Insurance
Provides coverage for claims against business owners against alleged or actual breach of professional duty.
Professional indemnity insurance covers the risk that is linked to professional duty when providing advice, design or a service for a fee.
This type of cover is often taken out by a whole range of professionals including computer consultants, marketing and PR agencies, consulting engineers, architects, project managers, accountants and photographers.
Product Liability Insurance
Provides the business owners with funds to compensate a third party that may have suffered injury or property damage arising from use of products or through an occurrence related to the insured's business activities.
Product liability cover does not usually recognise claims for professional services.
Gary Ross Hunter is an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, news.com.au, The Telegraph, Explore Travel and Escape. Gary holds a Kaplan Tier 1 General Insurance (General Advice) certification and a Kaplan Tier 1 Generic Knowledge certification which meets the requirements of ASIC Regulatory Guide 146 (RG146).
Hi, I make my own nail polishes and beauty products, do you have any recommendation for product liability insurance? I already have public liability insurance. TIA
If we want to be a distributor for a certain camera brand from China. Apart from product liability what other insurance do we need? I would like a quote please. Thank you
As we are a comparison website, I’m afraid we may not be able to recommend specific insurance to you as the best option would depend entirely on your situation by taking into account the type of your business, your cover needs, and the insurance you can afford. Nevertheless, there are types of business insurance that you’d want to check. If you’d like to get a personalised business insurance quote, best to fill out the form from that same page and click on the green “Enquire Now” button.
Please ensure you review the relevant PDS and T&C before purchasing a cover.
Hello. I am wanting to start a small home based business making baby wash, lotions etc. that a naturally based. I have developed the product and now am looking at the next steps. It will be an online business with myself doing everything and not employing anyone. What type of insurance will I need to start with? and around about what will I need to pay?
Thank you for your enquiry. Considering you are manufacturing your own product to distribute to the public, it would definitely be worth considering taking out product liability cover to offer protection in the event that a claim is made against you. It is not possible to provide you with an estimate for what you will pay based on this information alone as many other factors will need to be considered. finder.com.au is not currently partnered with any business insurance providers but we can recommend the business insurance broker austbrokers.com.au/
Thanks again for your enquiry and apologies for not being able to provide more assistance at this stage.
I am new in business and just started sourcing out for product liability insurance for my business. I am selling security products importing from China and resell it in Australia. However, all of the insurance companies I called advise that they do not offer product liability insurance to anyone that import Electronic products from overseas especially security products (cctv, camera gadgets etc) because I am considered as the manufacturer of the products if I’m importer. The insurance companies advise that we should go for insurance brokers to source for the product liability insurance. We have being sourcing for the past few months and it appears that anyone that sell imported security products from overseas will not be able to cover the business in terms of product liability. Do finder.com.au know of any insurance companies that offer this type of product liability insurance.
Your help is much appreciated.
Thank you for your enquiry. Unfortunately, most insurers will exclude cover for products that are imported from overseas. Finder does not currently feature any Business Insurance providers that will provide cover for this type of product distribution. You may wish to make an enquiry with the Australian General Insurance Broker Group Austbrokers.com.au
We apologise for not being able to provide further assistance with your enquiry at this stage.
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Product liability
Public liability
Hi, I make my own nail polishes and beauty products, do you have any recommendation for product liability insurance? I already have public liability insurance. TIA
Hi Pari,
I hope you are doing fine today. Thanks for your question.
As we are a comparison website, I cannot recommend or suggest a specific option for you, as your decision would entirely depend on your needs.
On the page you are viewing, you may fill out the form for you to receive a quote for product liability insurance.
I hope this helps.
Cheers,
Judith
If we want to be a distributor for a certain camera brand from China. Apart from product liability what other insurance do we need? I would like a quote please. Thank you
Hi Renae,
Thank you for your inquiry.
As we are a comparison website, I’m afraid we may not be able to recommend specific insurance to you as the best option would depend entirely on your situation by taking into account the type of your business, your cover needs, and the insurance you can afford. Nevertheless, there are types of business insurance that you’d want to check. If you’d like to get a personalised business insurance quote, best to fill out the form from that same page and click on the green “Enquire Now” button.
Please ensure you review the relevant PDS and T&C before purchasing a cover.
Cheers,
May
Hello. I am wanting to start a small home based business making baby wash, lotions etc. that a naturally based. I have developed the product and now am looking at the next steps. It will be an online business with myself doing everything and not employing anyone. What type of insurance will I need to start with? and around about what will I need to pay?
Hi Fran,
Thank you for your enquiry. Considering you are manufacturing your own product to distribute to the public, it would definitely be worth considering taking out product liability cover to offer protection in the event that a claim is made against you. It is not possible to provide you with an estimate for what you will pay based on this information alone as many other factors will need to be considered. finder.com.au is not currently partnered with any business insurance providers but we can recommend the business insurance broker austbrokers.com.au/
Thanks again for your enquiry and apologies for not being able to provide more assistance at this stage.
Hi,
I am new in business and just started sourcing out for product liability insurance for my business. I am selling security products importing from China and resell it in Australia. However, all of the insurance companies I called advise that they do not offer product liability insurance to anyone that import Electronic products from overseas especially security products (cctv, camera gadgets etc) because I am considered as the manufacturer of the products if I’m importer. The insurance companies advise that we should go for insurance brokers to source for the product liability insurance. We have being sourcing for the past few months and it appears that anyone that sell imported security products from overseas will not be able to cover the business in terms of product liability. Do finder.com.au know of any insurance companies that offer this type of product liability insurance.
Your help is much appreciated.
Al
Hi Alan,
Thank you for your enquiry. Unfortunately, most insurers will exclude cover for products that are imported from overseas. Finder does not currently feature any Business Insurance providers that will provide cover for this type of product distribution. You may wish to make an enquiry with the Australian General Insurance Broker Group Austbrokers.com.au
We apologise for not being able to provide further assistance with your enquiry at this stage.
Thanks again for your enquiry and all the best.