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How do I Choose the Best Small Business Product Liability Insurance?

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  • Written By: M. Lupica
  • Edited By: Lauren Fritsky
  • Last Modified Date: 05 November 2016
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If you are starting a business where you will be selling or manufacturing products, it is important to protect yourself with small business product liability insurance. Not all small business product liability insurance policies are equal for every person, however. You need to know your product in and out because the choice you make should be heavily dependent on the nature of your business. The three main types of protection are those against manufacturing or production defects, problems with the design, and inadequate labeling. While those are the most important factors when purchasing a small business product liability insurance policy, there are also general insurance considerations you must keep in mind.

The first type of protection that small business product liability insurance may offer its holder is for a defect that is inherent in the product based on the way it is produced. Such a clause would cover any harmful ingredient or chemical in the product you manufacture or sell. For example, if you sell or manufacture anything people ingest such as food, drink, or medicine, then you may want strong protection in this regard as it would cover any harmful ingredient.

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If you sell anything that consumers physically manipulate to use or that has multiple moving parts, then you will want small business product liability insurance that covers design defects. A design defect policy will cover any harm resulting from a malfunctioning part on the product. For example, if you sell hammers and the head of the hammer breaks off, injuring the consumer, he or she may bring a product liability lawsuit against you. The design defect clause in your small business product liability insurance policy would cover such harm.

The last main type of coverage available through small business product liability insurance is protection for inadequate warning labels on a product on which one would normally be required. For example, if you are in the business of selling or manufacturing toys, then this is an appropriate type of coverage. It would ensure that if you overlook any appropriate warnings or overestimate the age range at which it is safe to use your product, you are covered.

There are also many general considerations that you must take into account when purchasing a small business product liability insurance policy. You want to weigh the level of coverage against the premiums you are required to regularly pay to maintain the insurance. Additionally, if you ship products all over the world, you may need to find a policy that covers more than just your home country. Lastly, you probably want to obtain a policy that contains a clause covering the costs of a product recall, as that can be an overlooked and costly process.

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