May 22, 2023
If you’re running a business that sells goods to the public, then you’ll already know all about your legal responsibilities around product safety. But did you know that customers can make civil claims for compensation against you in the event of illness, injury or property damage? And that you could be responsible for those claims even if you’re not the manufacturer of the product in question?
These facts – and the potentially life-changing ramifications of a successful claim against you from a financial perspective – emphasise the importance of having product liability insurance in place. This guide covers all the key basics you need to know about product liability insurance: how it works, how to assess whether you need it or not, and the levels of cover you may want to consider taking out.
Product liability insurance covers the cost of any claims that arise from illness, injury or damage to property caused by a product that you sell and/or make.
While you’ll no doubt be making every effort to make sure that products are safe for customers, risk can never be brought down to zero. Accidents or incidents can always happen, whether it’s injury caused by a manufacturing defect, or an allergic reaction that a customer has to a particular item of food or to some make-up they’ve bought.
If the customer can demonstrate that they have suffered financial loss as a result – such as time off work, medical care, or replacing damaged goods – then they can make a claim against you for compensation. If you have product liability insurance in place, then you and your business are insulated from this expense, which can easily run into the thousands of pounds.
If you sell any goods to the public, then taking out product liability insurance is strongly recommended. It’s also important to make the point that whether you make the products you sell, or procure them from a manufacturer to sell on, is irrelevant. As the vendor, you will be responsible for any illness, injury or property damage that your products cause and that result in demonstrable financial loss, either for a customer or for a third-party member of the public.
If you are running a small business, or you’re self-employed, then it is highly unlikely that you would be able to absorb the cost of a compensation claim and associated legal fees yourself. These expenses could threaten the viability of your business, and could even lead to you losing your home if operating as a sole trader or a partnership. Product liability removes this risk by covering those costs instead, meaning you only have to pay whatever level of excess is agreed in the policy.
While you are legally required to ensure that the products you sell are safe for customers, product liability insurance is not required by law. However, you may find that it is a necessary requirement of doing business, because it is often mandated by manufacturers, retailers and other organisations as a condition of working with them.
In any case, it is good practice to have insurance cover in place for your products, given the potential size of any compensation claims and the relatively low cost of taking out a policy.
The range of potential premiums for a product liability insurance policy is vast, because of the huge variation in the types of products that are sold. For example, a self-employed baker that is selling cakes at fetes and festivals will pay much less than a large business making and selling heavy-duty industrial machinery. The price you sell items at, and the nature of your supply chain, will also have a bearing on your quote.
With specific reference to the sports, leisure and beauty industries, it’s likely that you’ll be running a small operation with a relatively limited but highly specialised range of products. This should help keep your premiums to a low level – and the ability to pay monthly should ensure that the cover doesn’t have too much of an impact on your cashflow.
Whatever products you sell, and whatever the size of your business, product liability insurance is important. In the sports, leisure and beauty industries, it’s especially vital as many products are designed to be used on a person’s body, potentially heightening the risk of illness or injury if there is a problem.
That’s why many of our insurance policies at Protectivity incorporate comprehensive product liability insurance cover. That way, you can sell your goods in the confidence that you won’t lose out financially in the event that something goes wrong. Available through flexible payment plans for just a few pounds a month, it represents a simple, worthwhile investment as you grow your business.
Find out more on our product liability insurance options here.