What is product liability insurance?

Product liability insurance covers the cost of claims made by customers who suffer harm as a result of a product you supplied. This can include:

• Illness or injury: e.g. food products that cause food poisoning or allergic reactions
• Property damage: if a faulty electrical product damages a customer’s home
• Wrongful death: in serious cases where a defective product has fatal consequences

Policies typically address several categories of product defects, including:

• Manufacturing defects: faults that occur during the production process, making the item unsafe
• Design defects: flaws in the original design that affect all units produced
• Marketing defects: misleading claims about what the product can do
• Improper warnings or instructions: failure to give customers adequate safety guidance
• Strict liability: liability imposed regardless of whether negligence can be proven

For example, if a customer experiences an allergic reaction to a soap you have produced and the packaging does not clearly highlight the allergens, they may be entitled to make a claim.

In some cases, a customer can still bring a claim even if the product was misused if you failed to provide clear warnings or instructions.

Who needs product liability insurance?

Since product liability insurance applies to physical products, it is most relevant to businesses that manufacture, distribute or sell products. Examples include:

• Manufacturers: producing goods for direct sale or wholesale distribution
• Wholesalers and distributors: supplying products to retailers or other businesses
• Retailers, shops and e-commerce sellers: selling products directly to customers, either in person or online
• Specialist producers: such as print shops or businesses that create customised goods
• Construction firms and contractors: supplying or installing building materials and equipment

Your business may still be liable even if you sold the product but did not manufacture it. Circumstances where liability may apply include:

• Your branding, such as your name or logo, appears on the product
• You import the product from outside the European Union (or post-Brexit, outside the UK)
• The manufacturer cannot be identified, has ceased trading or cannot be contacted
• You repair, refurbish or otherwise alter the product before sale

What product liability insurance covers

While product liability insurance covers many scenarios, policies usually require businesses to meet specific conditions to remain protected.

You might not be covered if:

• A product fault is the result of poor manufacturing by your business
• A customer suffers purely financial losses (rather than injury or property damage) as a result of the defect

However, you may be covered if you can demonstrate that:

• The fault originated with the manufacturer who supplied you
• You provided clear safety instructions and warnings against misuse on the product label
• You have suitable quality control and record-keeping systems in place
• Your contract with the manufacturer specifies safety, quality standards and return procedures for faulty goods
• You have specified that faulty goods can be returned directly to the manufacturer

By maintaining strong contractual agreements and clear quality processes, businesses can reduce their risk and ensure product liability insurance provides effective protection.

How to find insurance for product liability

Depending on your business needs, you can source product liability insurance through:

• Specialist brokers: focus on product liability and can adapt the cover to your sector
• Generalist insurance brokers: provide broader advice across different policy types and can compare multiple providers
• Direct from an insurer: many insurance companies offer product liability as part of a business package, which can sometimes be more cost-effective

Brokers are particularly useful for businesses with high-risk products, complex supply chains or international sales, as they help match your profile to the right coverage.

What to look for in product liability coverage

Policies vary in the amount they will cover. Typical limits in the UK range from £1 million to £5 million, although larger businesses or those in high-risk sectors may require higher limits.

The most suitable level of cover depends on factors such as the type of products you sell, the size of your business and the potential cost of a serious claim.

Product liability insurance cost

The cost of product liability insurance depends on a range of factors, including:

• Risk level of your business: higher-risk sectors, such as food production or electrical goods, typically have higher premiums
• Potential financial impact: insurers assess how costly a claim could be for your business, including compensation and legal fees
• Type of products sold: complex or potentially hazardous products usually carry more risk than low-risk items
• Size and revenue: larger businesses with greater turnover may pay more due to the higher scale of risk
• Claims history: a track record of previous claims can increase your premium
• Sales channels: selling online or internationally may expose you to additional risks
• Coverage limits: the higher the level of cover you choose, the more you can expect to pay

When securing a deal, prepare an overview of your business activities, risk management processes and product safety measures. Discussing this with a broker or insurer can improve your chances of finding appropriate cover at a competitive price.