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Stories of big corporations being sued after a product led to injuries have been big news in the past. Unfortunately, as a small business owner, your company could also be liable for damages caused by a product or even service you provided. Product recalls, lawsuits, and a damaged reputation are just a few of the consequences that could result from a product liability lawsuit. Product liability insurance can help protect your small business from such claims.

What is Product Liability Insurance?

Product liability insurance will protect a company from claims made against it by consumers. The claims may be related to the manufacture, sale or distribution of the product. Lawsuits may be filed for design or manufacture defects, a malfunction or failure to provide warning of a potential injury. A product liability insurance policy may cover fees associated with such lawsuits. As well as the cost of potentially recalling or destroying the products in question. Depending on the policy, current or future business losses may also be covered.

How Does Product Liability Insurance Work?

A product liability claim may be made against your business for a manufacturing or production flaw, a design defect or a failure to warn. The claimant, or persona injures, will seek compensation for medical costs, lost wages, attorneys’ fees and even punitive damages. Product liability insurance will protect your business in the event that the product injured someone or caused property damage.

The cost of liability insurance, much like other insurance policies, will vary based on the type of product you manufacture and sales volume. Some products may be riskier than others, which could lead to a higher premium. The best way to keep your premium down is to minimize the product risk by checking your design and manufacturing process, putting a quality assurance program in place and making sure the product passes safety tests.

Once you decide on a policy that is right for your business, review it once or twice a year. As your business becomes more successful, you may need more coverage. Protect your company assets and reputation by opting for product liability insurance, rather than risking financial and professional ruin.