Product Liability Insurance Cost: Everything You Need to Know

As a business owner, you know the importance of protecting yourself from the unexpected. One way to do this is by investing in product liability insurance. This type of insurance can provide coverage in case your product causes harm to someone or damages their property. But how much does product liability insurance cost? In this article, we’ll answer that question and provide you with everything you need to know about product liability insurance cost.

Understanding Product Liability Insurance

Before we get into the cost of product liability insurance, let’s first discuss what it is and why it’s important for your business. Product liability insurance provides coverage in case your product causes harm to someone or damages their property. If a customer sues your business because of a defective product, this insurance can help cover the costs associated with the lawsuit.

Product liability insurance is especially important for businesses that manufacture, distribute, or sell products. Even if you’re not the one who created the product, you can still be held liable if it causes harm to someone. That’s why it’s important to protect yourself with product liability insurance.

How Does Product Liability Insurance Work?

Product liability insurance works by providing coverage in case your product causes harm to someone or damages their property. If a customer files a lawsuit against your business, this insurance can help cover the costs associated with the lawsuit, including legal fees and damages awarded to the plaintiff.

Most product liability insurance policies are designed to cover three types of claims:

1. Bodily injury – if someone is injured as a result of using your product
2. Property damage – if your product damages someone else’s property
3. Personal injury – if your product causes emotional distress or other non-physical harm

It’s important to note that product liability insurance typically does not cover intentional harm or criminal activities.

Factors That Affect Product Liability Insurance Cost

Now that you understand what product liability insurance is and how it works, let’s talk about how much it costs. The cost of product liability insurance can vary depending on several factors:

Type of Product

The type of product you sell can have a big impact on the cost of your product liability insurance. Products that are more likely to cause harm, such as power tools or medical devices, will be more expensive to insure than products that are less risky, such as clothing or office supplies.

Product Sales Volume

The amount of products you sell can also impact the cost of your product liability insurance. If you sell a high volume of products, you’ll likely pay more for insurance than a business that only sells a few products per year.

Product Safety Record

If your products have a history of causing harm or have been recalled in the past, you may be considered a higher risk and will likely pay more for insurance.

Business Type

The type of business you own can also affect the cost of your product liability insurance. For example, a business that operates in a high-risk industry like construction or healthcare will likely pay more for insurance than a business that operates in a low-risk industry like retail.

Deductible Amount

The amount of your deductible can also impact the cost of your product liability insurance. A higher deductible will result in lower premiums, but you’ll need to pay more out-of-pocket if a claim is filed against your business.

How Much Does Product Liability Insurance Cost?

Now that you know what factors can affect the cost of product liability insurance, you may be wondering how much you can expect to pay. Unfortunately, there’s no one-size-fits-all answer to this question. The cost of product liability insurance can vary greatly depending on your business and the factors listed above.

However, to give you an idea of what you can expect, here are some averages for product liability insurance cost:

Annual Revenue	Average Cost of Product Liability Insurance
Less than $500,000	$750 – $1,000 per year
$500,000 – $1 million	$1,000 – $1,500 per year
$1 million – $5 million	$1,500 – $5,000 per year
Over $5 million	$5,000+ per year

Frequently Asked Questions (FAQ)

What is product liability insurance?

Product liability insurance provides coverage in case your product causes harm to someone or damages their property. If a customer sues your business because of a defective product, this insurance can help cover the costs associated with the lawsuit.

Why do I need product liability insurance?

If you manufacture, distribute, or sell products, you can be held liable if your product causes harm to someone or damages their property. Product liability insurance can protect you from the financial burden of a lawsuit.

How much does product liability insurance cost?

The cost of product liability insurance can vary depending on several factors, including the type of product you sell, your sales volume, and your business type. To give you an idea, averages for product liability insurance cost range from $750 – $1,000 per year for businesses with less than $500,000 in annual revenue to $5,000+ per year for businesses with over $5 million in annual revenue.

What does product liability insurance cover?

Product liability insurance typically covers three types of claims: bodily injury, property damage, and personal injury. It’s important to note that intentional harm or criminal activities are not typically covered.

What factors can affect the cost of product liability insurance?

The cost of product liability insurance can be affected by several factors, including the type of product you sell, your sales volume, your product safety record, your business type, and your deductible amount.

What should I look for in a product liability insurance policy?

When shopping for product liability insurance, you should look for a policy that provides adequate coverage for your business and takes into account the specific risks of your industry and products. You should also consider the cost of premiums and the amount of your deductible.

Investing in product liability insurance can protect your business from unexpected costs and legal fees in case your product causes harm to someone or damages their property. By understanding the factors that can affect the cost of product liability insurance, you can make an informed decision about how best to protect your business.