How Much Does an Insurance Policy for Defective Product Liability Cost?


Business owners who are involved in the manufacturing or selling of a potentially dangerous or defective product are becoming more and more aware of their need to have a product liability insurance policy to protect them in the event of injury or loss claims that arise out of defects in one of their products.

Product liability includes liability for injury or property damage caused by defects in a product, or by the exclusion of warnings that resulted in improper use of a product, causing injury or damage.

But how does a business owner know how much this type of insurance will cost them?

The truth is, product liability insurance policies vary in cost, depending on several different factors. One of these factors is the risk level of the product your business is responsible for.

  • What type of product are you selling – something that could potentially cause severe damage or injury, such as a knife set?
  • Or does your business sell a product that has a small chance of injuring people or damaging property, like a pair of leather gloves?
    The risk level of your product is one of the most influential keys in determining the price of your policy – lower risk products will cost significantly less than high-risk products such as firearms that carry a much higher risk of accidents leading to injuries or even death.

In this uncertain economy, more and more people are turning to self-employment as a way to take control of their own financial destiny. Unfortunately, many are risking financial disaster by operating without product liability insurance.

Product insurance covers both goods and services. Goods produced by home-based businesses include wood furniture, pottery, and baked goods while services include in-home daycare, carpet cleaning, and lawn maintenance. All of these businesses, as innocuous as their products seem, are vulnerable to liability claims.

Micro Businesses, those employing up to six full or part-time employees and grossing less than $250,000 annually, are at even greater risk of product liability; yet many operate uninsured.

Misinformation is the most common reason new sole proprietorships risk operating without products liability insurance.

There are no unannounced intrusive home inspections at inconvenient hours, though an inspection may be scheduled in some instances by mutual agreement. Premiums do not eat up profits; home-based sole-proprietorships can be covered for under $400 per year in many instances.

Having real control over personal financial destiny requires diligent risk management. The importance of product liability insurance for home-based businesses, sole proprietorships, and micro-businesses cannot be over-emphasized.

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