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  • > Quick Guide to Product Liability Insurance
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The Benefits of Product Liability Insurance

Worldwide Coverage

Product liability insurance offers worldwide protection hence covers legal liabilities arising out of judgement and settlement made in any country by protecting your business worldwide.

Defense Cost Cover

Product liability insurance covers the range of expenses occurring due to a defective product. Some of them include overseas litigation, covering exports when domestic turnover is covered, and defence costs.

Comprehensive Protection

Product liability insurance covers a wide range of risks to your product due to which liability may arise. These include any defects in product, packaging defect, improper use of product or wrong user manual.

Affordable Premium

Product liability policy is available at affordable premium. You can customise the cover according to business needs by choosing from various add-ons such as vendor liability cover and technical collaboration liability cover.

Quick Guide to Product Liability Insurance

Product Liability Insurance

Running a business comes with inherent risks. You are responsible for the health of a large number of customers. You can be filed for a heavy fine if your product causes unintended damage or harm to somebody's property or body.

Most companies invest in customised insurance policies to have protection against such threats. One such policy is Product Liability Insurance. It is just like any other insurance you buy, but it caters to companies' specific risk protection needs. So, let's learn more about this insurance policy.

What is Product Liability Insurance?

First, let's get clear on what is Product liability insurance.

Specialized insurance protects businesses from potential financial losses resulting from damage to their consumers. In addition, it protects from third-party claims and legal issues arising from negligence or defects in the product.

If a company's product hurts someone, that person can sue the company. In insurance, the customer is referred to as the third-party. The business is known as the first party. The second party is the policy provider.

The first party can be liable for the losses even when not directly under fault. In some cases, the court may side with the customer even if the harm was caused by their own negligence with the product.

Businesses that manufacture, distribute, or sell physical products are the ideal clients for Product Liability insurance. However, for businesses selling virtual or digital products, another insurance called Professional Liability Insurance is needed to cover their losses. These insurances fall under General Liability Insurance, which covers a wide range of product and service-related risks.

Why Do You Need Product Liability Insurance in India?

Product liability insurance is considered an effective risk management strategy for businesses.

  • Some inherent risks are involved in selling physical products that may result in unexpected costs to the company. Not all companies are prepared for such financial drains in their cash flow.
  • If a company is unprepared to incur such losses, this can result in a massive hole in its expenses. This may impair the functioning of the business due to a lack of capital, which can further increase the losses. Product liability insurance prepares the organisation to deal with such costs without spending from its pocket.
  • Industries like food, beverages, chemicals, pharmaceuticals, etc., are at higher risk due to the potential for product contamination.
  • Construction-related businesses can also be prone due to the risky nature of the job
  • Electricians, plumbers, and other service providers can be liable for property damage or technical negligence.

Hence, Product Liability insurance covers a wide range of businesses.

Features of Product Liability Insurance

The following features make Product Liability Insurance a critical policy for businesses. Ensure to look for these in your policy to get the best deal.

  • Defective product damage costs - This is a fundamental feature of the policy, which protects against damages caused by the product.
  • Legal defence coverage - Includes court session costs, lawyers' fees, etc. Some the Product Liability Insurance does not cover this feature.
  • Contractual liability coverage - These liabilities include contract-related mishaps such as terms disagreement, product guarantee claims, etc.
  • Worldwide coverage - Some policies provide global coverage. This means that claims from around the globe will be dealt with.

Types of Product Liability Insurance Plans

There are different types of Product Liability Insurance plans available in the market. You can also request customised plans tailored to your needs.

  • Occurrence-based plans - These are the plans that cover claims from the time of occurrence of the event. Under this type of coverage, the company is protected if the incident happened within the policy period, even if the claim is made after the policy has expired.
  • Claim-based coverage - On the other hand, claim-based plans for Product Liability Insurance only provide coverage if both the incident and the filing of the claim occur within the policy period.
  • Prior acts coverage- These plans include coverage due to incidents that occurred before the purchase of the policy.
  • Retroactive data coverage - This policy works on a retroactive date. The date specifies the time after which coverage is provided for the damages.

List of Companies offering Product Liability Insurance Policy

Product liability insurance protects the insured against claims of personal injury or damage to property damage by products sold or supplied by the insured business. The policy covers the entire sum liable to be paid as damages. The protection also covers legal defense costs. Product liability insurance covers liabilities arising from death, injury, or diseases caused by the products sold or supplied by the insured. It also covers accidental damage to property by such products.

They also offer globally acceptable policy, add-on, and limited vendor liability covers for vendors named in the policy.

Insurance companies that offer product liability insurance policies in India include the following:

  • New India Assurance Co. Ltd.
  • HDFC ERGO General Insurance Co. Ltd.
  • Tata AIG General Insurance Co. Ltd.
  • National Insurance Co. Ltd.
  • United India Insurance Co. Ltd.
  • ICICI Lombard General Insurance Co. Ltd.
  • Bajaj Allianz General Insurance Co. Ltd.
  • Reliance General Insurance Co. Ltd.
  • Oriental Insurance Co. Ltd.
  • IFFCO Tokio General Insurance Co. Ltd.
  • SBI General Insurance Co. Ltd.

Product Liability Insurance Premium

The premium for Product Liability Insurance represents the payment made to obtain coverage for potential losses associated with product-related risks. This amount can vary based on factors. These factors include the type of risk, company revenue size, claims history, pricing models, and inclusion of additional coverage options.

Comparatively, Product Liability Insurance Premium costs more than other policy plans due to more costs associated with the products. However, it can benefit the company as the cost covered by the policy for compensation is much larger than its premium.

Coverage Under Product Liability Insurance

Coverage includes the aspects of compensation handled by the insurance policy. These factors may vary depending on the needs and nature of the Product Liability insurance policy.

  • Product defects - Any damages related to manufacturing or product design defects.
  • Bodily injuries - Costs related to the treatment and care of injured consumers.
  • Property damage- compensation for any property damage due to a product or service.
  • Legal expenses - Costs related to legal defence, attorney fees, court fees, etc. fall in this category.

Product Liability Insurance Limitations

Product Liability insurance does not cover the following:

  • any virtual harm caused by digital products
  • employee injuries during the manufacturing or shipping
  • any general consumer injuries unrelated to the use of the product
  • any accidents that may occur while shipping or delivering the product
  • property damages to the company during the manufacturing of the product
  • product recall costs caused by consumer dissatisfaction
  • costs of repairing defects or malfunctions
  • product guarantee costs for providing exchanges or services

Product Liability Insurance Claims Process

The following steps are involved in claiming your Product Liability Insurance:

  • Notify the policyholder after the occurrence of the injury/damage. Provide relevant details such as the event's timing, the extent of the damage and the claim's nature.
  • Collect essential documents such as product testing reports, invoices, packaging and manufacturing records, and product sales records. Include any other relevant documents that can provide support for your claim.
  • The policyholder will carry out the required evaluation and investigation. They will provide legal attorneys and documentation if the case is taken to court.
  • Both parties involved will negotiate a settlement to come to a conclusion. The policy will provide the financial assistance involved in the settlement of the claim.

Remember that these are basic guidelines. Actual steps may differ according to the policy you choose.

Frequently Asked Questions

A Product liability insurance coverage is essential as it will be able to safeguard the insured against the legal liability claims when there is a property damage of a third-party or if they get injured by a product manufactured or supplied by the insured. Third party liabilities can give rise to a lot of unnecessary costs including legal costs and a product liability insurance will serve as a backbone to counter all such costs.
As an example of Product Liability Insurance, suppose your company sells beverages. Due to negligence or contamination in the product, many consumers get food poisoning. This is where your Product Liability Insurance would come in. It would aid all the financial costs of treating the affected consumers and any legal charges involved.
Contractual liabilities are the risks associated with signing a contract with another company. Product Liability Insurance does not cover these liabilities related to non-performance and contract obligations. It only covers physical and legal damage caused to third parties by a product.


What are the duties of Insured under product Liability Insurance?

A product liability insurance plays an important role by safeguarding the business from various claims which may arise in respect of its products and services. Though the product liability insurance offers coverage; the policyholder has to discharge some duties under the policy as the following...
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What is Product Liability Insurance?

A product liability insurance is a policy which indemnifies the distributor, wholesaler and retailer against various losses or damages which could arise out of the consumption or use of products manufactured, sold or distributed by them.

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Does principle of subrogation apply to Product Liability insurance? How?

Yes, the principle of subrogation applies in the case of product liability insurance as well. If a product liability insurance company settles the claim, the insurer shall be subrogated to all of the policyholder’s rights of recovering the claim amount if the loss or damage happens due to the fault of the...
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Strong Claims Support

We manage all aspects of your claim - from preparing documentation to follow-up with the insurer.

Value-Added Services

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