Product liability insurance

Product liability insurance covers the cost of compensating anyone who is injured by a faulty product that your business designs, manufactures or supplies.

You should consider product liability insurance if your business designs, manufactures or supplies a physical product that is sold or given away for free.

Your business may be held legally responsible for any injuries to people or damage to property caused by a faulty product.

You can be held liable for faulty products even if you did not manufacture them. You may be liable for compensation if:

Your business’s name is on the product

Your business repairs, refurbishes or changes a product

You imported the product from outside the European Union

You cannot identify the product’s manufacturer, or the manufacturer has gone out of business

What does product liability insurance cover?

Product liability insurance covers the cost of compensating anyone who is injured by a faulty product that your business designs, manufactures or supplies.

It protects you against the cost of compensation for:

Personal injuries caused by your faulty product

Loss of or damage to property caused by your faulty product

Unforeseeable circumstances such as product faults that your quality control system could not identify

Product liability insurance may not cover you for

Faulty products resulting from bad workmanship

Financial losses to a business or person caused by your faulty product

If you do not manufacture the product but you distribute it, you should be covered if you can show that:

The products were faulty when they were supplied to you

You gave customers adequate safety instructions and warnings about misuse

You included terms for the return of faulty goods to the manufacturer

Your supply contact with the manufacturer covers product safety, quality control and returns

You have good quality control and record-keeping systems

Buying product liability insurance

You can buy product liability insurance directly from an insurer or from a specialist broker through the British Insurance Brokers’ Association (BIBA). Most businesses take out policies that cover them for compensation claims of between £1 million and £5 million.