Product Liability and Recall Insurance

Product Liability Insurance

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What is Product Liability and Recall Insurance? 

Product Liability and Recall Insurance provides comprehensive protection for your business from any legal or financial obligations that may arise from claims of injury or property damage caused by products you have produced, sold, or distributed. This type of coverage includes product recall, product guarantee, third party recall, and third party financial loss extensions to ensure your business is fully protected.

Product recall coverage pays for the recall and redistribution of defective products, while product guarantee pays for the repair and replacement of faulty items. The financial loss extension covers any additional expenses incurred by your supply chain partners due to a recall. As a manufacturer, distributor, or retailer of physical goods, you may be held liable for selling defective products to customers. Product Liability and Recall Insurance can help protect your business from any legal and financial repercussions of such claims.

Who needs Product Liability and Recall Insurance Coverage?

Businesses of all types should consider obtaining product liability insurance, particularly: 

  • Manufacturers
  • Distributors
  • Wholesalers 
  • Importer and exporters 
  • Retailers 
  • Companies involved in installation work

Why get product liability insurance plan?

Apart from the comprehensive coverage offered by a Product Liability Insurance policy, it provides several other significant benefits. This is why it has become a necessity for businesses operating in the entire product ecosystem around the world.

  • Protection to Your P&L - No business can afford to be without proper protection for its Profit and Loss statement. Product Liability lawsuits can have catastrophic consequences for companies of all sizes, leading to financial ruin. That is why it is so essential for businesses to have an effective policy in place to guard against potential losses.
  • Worldwide Coverage - This policy offers global coverage with the option to select the relevant territory and jurisdiction for your business.
  • Product Recall - In the event of a product recall due to a potential threat of bodily injury or property damage, this extension will cover all associated expenses, including those for redistributing the recalled products back to distributors.
  • Product Guarantee - Product guarantee is also included, ensuring that costs incurred for product recall exercises are taken care of.
  • Third-party financial loss coverage - Product liability insurance can help protect your clients from additional costs associated with product recalls, such as extra wages and increased production costs.
  • Crisis management and PR Expenses - In the event of a valid claim, the policy provides coverage for expenses incurred to restore lost reputation or brand value.

Common Risk Scenarios Covered by Product Liability and Recall Insurance 

  • Food poisoning caused by consuming a food product manufactured by you. 
  • Overheating of a laptop (or any other electronic device), manufactured by you, causing injury to its user. 
  • A defect detected in an automobile factory leading to a product recall claim to avoid a further a product liability claim
  • Detection of lithium batteries installed in a batch EV's being unsafe leading to a product recall claim

Major Inclusions of a Product Liability and Recall Insurance Plan 

When a claim for bodily harm or property damage arises, product liability insurance will often assist with the following expenses:

  • Your legal expenses
  • Compensation is paid to the damaged party as a result of settlements and court orders
  • Medical bills for the victim

Major Exclusions of a Product Liability and Recall Insurance Policy

Product liability insurance would not provide coverage for the following:

  • Repairing/Refurbishing costs
  • Financial losses from loss of market share/goodwill
  • Wilful manufacturing/distributing of defective/dangerous products
  • Employee injuries sustained while manufacturing the product
  • Technology products claims’ are covered in Errors and Omissions Insurance.
  • Contractual liability

Factors that determine Product Liability and Recall Insurance plan cost

Product liability insurance plans usually charge higher premiums than other insurance plans; however, in the case of claims, the premium expenses would be less than the expense of legal issues. This makes purchasing this insurance policy essential as well.

Public places like chemical industries, alcoholic beverage producers, tobacco companies, etc., are among the higher-risk locations. Your insurance company may decline to handle your claim if the nature of your goods entails unexpected risks. As a result, you could have to pay an outrageous sum to compensate for the loss.

Following are some variables that could affect your product liability insurance costs:

  • Product type:  Higher rates are seen in products like food items that are more likely to cause harm to the consumer if they are defective.
  • Sales: You will pay more for insurance as your sales increase.
  • Position within the supply chain: The prices are greater for manufacturers than wholesalers.
  • Coverage limits: Higher rates are associated with more coverage.
  • Claim background: Rates will increase due to prior claims.

Whether you are running a small business or a big one, having an adequate product liability insurance policy can make a significant difference in case of a crisis. It will help the firm to manage its legal liabilities easily without hampering the business finances. So, get in touch with one of experts at Policybazaar UAE and find a plan that’s just perfect for your business needs.