product liability insurance
By Okbima 04 May 2024 12

Product Liability Insurance Policy: Covered, Not Covered & Claim Process


Product liability insurance is a type of insurance that offers coverage for businesses if their products cause harm or injury to a consumer. Damages related to bodily injury, property damage, and legal fees are covered in this policy. Intentional acts & fraud are not covered. For a claim, you’ve to provide documentation of the incident which allows the company to investigate before determining coverage.


What Is Product Liability Insurance Policy?

A product liability insurance policy is a type of insurance that protects businesses from financial losses from defective products. This type of insurance provides coverage for legal costs, settlements & judgments that may from claims made against a company due to injury or damage caused by a faulty product. Product liability insurance is essential for businesses that manufacture, distribute, or sell goods as it helps to reduce the risks & liabilities associated with product defects.


What Is Covered In Product Liability Insurance?

Product liability insurance protects businesses from financial loss if their products cause harm to others. Product liability insurance coverage includes Bodily Injury, Property Damage, Defense Costs, etc.

  • Bodily Injury: Covers medical expenses and other damages if someone is injured by a defect in your product.

  • Property Damage: Pays for repairs or replacement of someone else's property damaged by your product's defect.

  • Defense Costs: Covers legal fees if you are sued over a product liability claim, regardless of the final verdict.

  • Recall Costs: Helps recoup expenses associated with recalling a defective product, like advertising and shipping.

  • Business Interruption: Replaces lost income if your business is forced to shut down due to a recall.

  • Completed Operations: Protects products you've already sold if they cause harm later.


What Is Not Covered In Product Liability Insurance?

Product liability insurance protects businesses, but it has its limits. Here's what isn't covered in this policy.

  • Intentional Acts: If you manufacture a dangerous product or don’t follow safety standards.

  • Contractual Obligations: Breach of contract, such as failing to meet performance specifications, isn't covered.

  • Economic Losses: The policy won't cover lost sales or brand reputation damage.

  • Product Recalls (usually): The cost of recalling a defective product is excluded, though some policies may offer add-on coverage.

  • Normal Wear and Tear: Damage caused by everyday use isn't product liability.

  • Fines and Penalties: Government fines or damages aren't covered.


Product Liability Insurance Add-on Covers

Businesses can choose to add extra coverage to their product liability insurance for more protection against certain risks.

  • Product Recall Cover: This extra coverage helps pay for telling people about problems, getting rid of faulty products, and losing money from recalling them.

  • Extended Product Liability Cover: Standard business product liability insurance covers injuries and damages, but this additional coverage also protects third parties from financial losses caused by a faulty product. This can include lost income or business interruptions.

  • Legal Expenses Cover: This extra coverage pays for the costs of legal defense when someone sues you for problems with a product you made. It includes paying for lawyers, court fees & any money you have to pay to settle the case.

  • Advertising Liability Cover: Businesses could get sued for their ads being false or for using other companies' ideas. This coverage protects them from legal issues related to advertising.

  • Contractual Liability Cover: Some insurance policies don't cover liabilities that you agree to in contracts with customers or suppliers. This extra coverage includes those contract liabilities for selling or supplying products.

  • Export Product Liability Cover: Businesses that sell products internationally may need insurance to protect them from being sued in different countries. 


Why Do You Need Business Product Liability Insurance?

Product liability insurance is very important for businesses in India because it helps protect them from losing money if someone sues them for selling a defective product.

  • Legal Compliance: In India, businesses are now being held responsible for any harm caused by their products. The Consumer Protection Act, of 2019 made the rules tougher for product liability. Getting product liability insurance helps follow the law.

  • Financial Protection: Product liability claims can cost businesses a lot of money. If they don't have insurance, they may not be able to afford legal fees, compensation & settlements, which could make them go bankrupt or have serious money problems.

  • Consumer Confidence: Showing that your products have insurance for any accidents or problems makes customers feel more & trusting. People are more willing to buy things from companies that care about their safety and health.

  • Risk Management: Product liability insurance is important for businesses to protect their finances. It transfers the risk of liabilities to insurance companies so that the business can keep running smoothly.

  • Market Access: Some stores, distributors & partners may want to see proof that a business has insurance that covers any harm caused by their products before they will work with them. Having insurance can help a business enter new markets & partnerships, which can create more growth opportunities.

  • Peace of Mind: In simple terms, product liability insurance reassures business owners that they are financially covered if something unexpected happens with their products.


Claim Process For Product Liability Insurance Policy

The claim process for a product liability insurance policy can vary slightly depending on your specific insurer, but here's a general process. 

  • Report the Incident: Contact your insurance company when you hear about a possible problem with your product. This could be from a customer complaint, lawsuit, or incident report. Don't wait to report it, even if a lawsuit hasn't been filed yet.

  • Provide Details: Tell your insurance company everything about what happened, like when it occurred, what went wrong & if anyone got hurt, or if things were damaged. The more details you share right away, the faster they can figure out what to do with your claim.

  • Submit Claim Forms: Your insurance company will have forms for you to fill out if you need to make a claim. These forms will ask for more information about what happened, the item that was damaged & any proof you have.

  • Collect Documentation: You may also have to give us copies of important documents like accident reports, medical records, photos of the damaged item, statements from witnesses & copies of the product warranty or manual.

  • Cooperate with the Investigation: The insurance company will send someone to check out the claim. Make sure to help them with their investigation and give them any information they ask for quickly.

  • Settlement or Defense: After looking into the situation, the insurance company will choose to either pay you for the claim or provide a lawyer to help you if the case goes to court.


Read More:

GMC vs GPA Insurance: Differences, Coverage & Which Is The Best?

Endorsement In Insurance 2024: Meaning, Types, And Examples

Section 37 Of Income Tax Act: Expenses Allowed & Not Allowed As Deduction

Principle Of Subrogation in Insurance: Meaning, How It Works & Types

Why Buy Transit Insurance?: Protect Your Household Goods



In conclusion, product liability insurance protects businesses from financial losses due to incidents related to their products. It covers legal expenses, medical costs, and damages caused by faulty products. It's important to read the policy carefully to understand what is covered and excluded. To make a claim, inform the insurance provider quickly, provide all required documents & cooperate with any investigations for a quick resolution.

Leave a Reply

Recent Post

high bp

High BP (Blood Pressure Or Hypertension): Symptoms, Causes & Foods To Avoid

18 May 2024

Health Insurance For New Born Baby: Benefits, Types & Required Documents

17 May 2024
Claim Settlement Ratio For Life Insurance

Claim Settlement Ratio For Life Insurance In 2022-2023: Importance & Process

17 May 2024

popular Post


Best Time to Visit Goa India 2024: Avoid Crowds

12 Mar 2024

Best Mileage Cars in India 2024

20 Feb 2024

Best 200cc Bikes in India 2024

30 Dec 2023