Product Liability Insurance

If you own a retail or e-commerce small business that sells, makes, repairs or distributes physical items, you should probably get product liability insurance.

Product liability insurance is commonly purchased by business owners who sell or distribute products directly to consumers, such as:

Small businesses that source and sell products online

For example: Amazon sellers, wholesalers or drop shippers

Even though you don’t personally make or manufacture the product, you’re part of the supply chain and can still be held liable for product defects.

Small businesses that make and sell products

For example: Clothing stores (online and brick-and-mortar), Etsy and eBay sellers or Shopify stores

Since you are making the product yourself, you can be held liable for product defects, allergic reactions or other damages your goods may cause.

Almost every product has the potential to cause damage. For example:

• A child could swallow a bead from a necklace your e-commerce business sold.
• An earring you made could puncture someone’s skin and lead to infection.
• Expired snacks at your convenience store could cause food poisoning.

It’s important to note that anyone can make a claim against your business, even if they didn’t buy it or use it.

Generally, the more products a company sells, distributes or produces, the greater its need for insurance for product liability.

Product liability is crucial for protecting your business from financial losses. Many small business owners never expect to find themselves in a lawsuit, but it’s better to be prepared for unexpected circumstances.

Depending on the product type and lawsuit, the customer may only have to prove that the product was faulty to win. You can be held liable even if you didn’t do anything wrong.

That’s why product liability insurance for small businesses is so important. Compared to the cost of an average claim, product liability premiums are a small investment for peace of mind.

If you own a retail or e-commerce business, a customer could claim that your product was defective and caused them injury or property damage. Product liability coverage can help to cover the resulting court fees, legal defense costs, verdicts and out-of-court settlements.

The liability can come from any point in the supply chain, from development and manufacturing to distribution and sales.

Product liability can also provide coverage for:

• Global claims: If your business is based in the U.S. but you sell goods abroad, your products would be covered.
• Private or white labeling of products: If you buy from a wholesaler and relabel the products (such as a clothing line that you design but don’t manufacture), your products would be covered.

Product liability insurance does not cover certain types of damage or injuries, including:

Product recall costs

Besides being costly, recalls can damage your company’s reputation. You would need to purchase a separate policy specifically designed to cover recalls.

Employee injuries

You would need to buy workers’ compensation insurance to cover employees who are injured at work.

Injuries to vendors or customers

Your general liability insurance policy could help to cover medical fees if someone other than an employee is injured at your business.

Like most insurance coverages, the cost of product liability insurance can vary from one company to the next. Some factors that might impact how much you’ll pay include:

• Product type. Products that are more likely to cause harm could have higher premiums.
• Revenue. The more you sell, the more you'll potentially pay for insurance.
• Your business operations. Manufacturers can expect to pay higher rates than distributors.
• Location. If your business is online or if you have a storefront.
• Claims history. If you have had claims in the past, your insurance costs could be higher.

Product liability insurance is only one type of insurance you need as a small business owner.

General liability insurance helps your business cover the costs if you or an employee accidentally damage someone’s property.

Note that you will need to buy general liability insurance in order to have product liability coverage (see below for details).

Depending on your business, other types of insurance may be important, such as:

Commercial property can help protect the physical items you need to do business. It can pay for replacement costs for your business equipment, goods, inventory and repairs to your building (if you own it), up to your policy limit.

A business owner’s policy (commonly known as BOP insurance) combines general liability insurance and commercial property insurance into one package that includes all the coverage available in those two types of insurance.

A BOP is a comprehensive way to help protect your business from unexpected expenses related to property damage, medical payments and lawsuits.

Workers’ compensation insurance covers workplace injuries. If an employee gets hurt on the job, it can pay for medical expenses and help cover lost wages. You can also cover yourself if you opt for business owner’s coverage.

Depending on your state, it’s almost always required when you have employees.

Commercial auto insurance is for business owners who own or drive vehicles. It can help pay for damages if you or an employee are involved in an auto accident while working or your work vehicle is damaged.

Professional liability insurance can help protect you from claims of work mistakes or professional negligence. This coverage is also known as errors and omissions (E&O) insurance.

You can choose which policies are right for you. Every business is unique and it’s important to get the coverage that best suits your particular requirements.

General liability insurance provides financial protection if you are held responsible for some of the most common accidents that can occur at a business, such as a customer injury or damages to someone’s property. It also provides coverage if you are forced to defend an accusation of libel or slander.

In addition to these types of coverages, general liability also provides product liability coverage for injuries and damages caused by your products.

Retailers and manufacturers get product liability coverage as part of their general liability coverage, which helps to more thoroughly protect their business.

At NEXT, product liability insurance is part of your general liability insurance.

If you already have a general liability insurance policy with NEXT, product liability is included.

If you don’t already have a general liability insurance policy, you will need to buy one to get product liability coverage. You cannot buy product liability on its own.

You can purchase the general liability you need online in less than 10 minutes with NEXT.

Here’s how the process works:

Start a general liability quote. We’ll ask you some basic questions about your business and operations, including:

• Your industry
• Where you do business
• How many years you have owned the business
• Number of employees
• Expected annual revenue
• Recent insurance and claims history

We will use the information you share to create a customized general liability policy that includes product liability.

If you like what you see, you can adjust the package limits to fit your preferences and make your purchase.

Start a free instant quote today.