Like many businesses in Australia, you strive to create quality products for your customers although, sometimes faults in products have the potential to cause injury and damage to your customers.
Product liability insurance* could help minimise the legal costs your business may encounter.
Product liability insurance is designed to protect businesses in the instance that their products cause injury to customers or damage to their property.
This type of liability cover could protect the business against costs associated with legal fees that may arise. It’s generally an important consideration for companies that are involved in providing products to the public including manufacturers, wholesalers and retailers.
These policies are generally part of a public liability insurance policy.
Product liability insurance works as a safeguard for Australian business owners since it can help cover various instances where a product could cause damage or harm. If a customer makes a product liability claim for injury or loss caused by your business’s product, your product liability policy may step in to cover the cost of the claim.
For businesses, product liability insurance can cover various situations where a product can negatively impact customers and cause financial loss to a business. These can include:
As with any type of insurance, it’s important to check your Product Disclosure Statement (PDS) for the policy wording to find out what is and isn’t covered.
Like any insurance product, there are some cases where your business may not be covered. The following are some common exclusions in product liability insurance policies:
Whether you are a sole trader, manufacturer, wholesaler or retailer, there is still a risk that your product could cause harm. Product liability insurance is a good idea to consider for every business that provides products for public use. Mistakes happen and product liability insurance also covers more than a product breaking or malfunctioning.
It’s important to consider what products you make or sell and whether product liability insurance is right for you.
As no two businesses are the same, premiums do vary. It’s difficult to determine a specific cost for product liability insurance since there’s a variety of influencing factors that can affect your premium, including:
The two often go hand in hand, with Product Liability included as part of a Public Liability insurance policy, but provide cover for very different things. Product liability insurance covers companies when their product causes harm or damage to a third party. Public liability insurance covers companies when they fail in their duty of care to the public.
To help explain this further, let’s use an example.
Product liability insurance: Linda sells homemade soaps but hasn’t included one of the ingredients in her product’s labels. One of her customers is allergic to that ingredient and ends up in the hospital. Because Linda had product liability insurance, she may be covered for the legal fees and compensation that results from her customer’s claim against her.
Public liability insurance: Linda opens a shop for her soaps but fails to properly secure the shelving she uses to display her products. The shelving collapses and injures one of her customers, whose claim may be covered by Linda’s public liability policy.
Product liability insurance isn’t required by law however, that doesn’t mean you shouldn’t consider taking out a policy when insuring your business. Product liability insurance can help protect your business from legal action if someone pursues a claim against you, especially since legal costs can climb very quickly.
Along with product liability insurance, your business could benefit from other types of business insurance, including:
Whether you’re starting a new business or just reviewing your current cover, our comparison service is a great place to start. Just enter your profession and some details about your business to compare a range of policies and get a quote – all at no cost to you!
*As with any insurance, coverage is subject to the terms, conditions and exclusions outlined in your policy document. The information provided on this webpage is general only and should not be relied upon as advice.
As our General Manager of Business Insurance, Stephen Zeller says product liability insurance is designed to protect businesses if their product causes injury or loss to customers. Stephen wants businesses to have the freedom to build and innovate new products with the added protection that product liability insurance provides.
With over 30 years’ experience in the financial services industry, including 27 years at the Bank of Queensland, Stephen is Compare the Market’s leading expert in business insurance. He’s also a long-time customer rights advocate and an allied member of the Australian and New Zealand Institute of Insurance and Finance (ANZIIF).
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