Product Liability Insurance UK Explained

Product liability insurance in the UK is a type of insurance that protects businesses from financial losses due to product-related claims.

This insurance is a must-have for companies that manufacture, import, or sell products, as it can help them avoid costly lawsuits and financial ruin.

Product liability insurance can cover a wide range of costs, including legal fees, compensation payouts, and even damage to a company's reputation.

In the UK, product liability insurance is usually purchased by businesses as a standalone policy or as part of a comprehensive business insurance package.

Product liability insurance is a specialized type of insurance that provides coverage for the costs associated with recalling a product from the market, as well as the cost of paying compensation to someone if your product causes an injury, illness, or property damage.

This type of insurance is crucial for businesses that sell physical products, as it can help mitigate the financial risk of product recalls and lawsuits. Product liability insurance can cover the cost of defending a claim as well as any eventual payout that was awarded.

Product liability insurance is different from public liability insurance, as it covers claims made specifically about products you sell, rather than accidents that happen to consumers in your workplace or in the course of your work.

The burden of proof often lies with the business owner, who needs to demonstrate reasonable care was taken in design, manufacturing, and labelling to avoid product liability claims. This is a legal minefield, where any misstep can trigger a claim against your company.

Product liability insurance can cover legal defence costs, compensation for the injured party, and even give you peace of mind, helping you to focus on growing your business rather than fearing expensive and lengthy legal battles.

Here are some key points to consider:

Product liability insurance in the UK offers a range of features and coverage to protect your business. Commercial package and standalone policies are available, giving you flexibility to choose what suits your needs.

Experienced underwriters are empowered to make quick decisions and provide quick turnaround times, ensuring you get the support you need when you need it. This is particularly important if you're holding a special event that may expose the public to more risk, as you can take out a policy that lasts for just one day.

Product liability insurance covers most of the cost of compensation and legal fees for claims against products that cause injury, illness, death, or property damage. This includes protection for claims against faulty or defective products, third-party liability claims, and compensation costs.

Here are some examples of the kind of problems someone could raise a claim against:

You can pick the level of cover you want to take out depending on what would best suit your business and circumstances. Common limits range from £1 million to £5 million, so be sure to choose a limit that's appropriate for the risks associated with your business.

If you sell or make products, even if your business is more of a hobby, you need product liability insurance. This is because you could be liable to pay compensation if your product causes harm to someone.

You're the manufacturer, and you make the product and sell it directly to customers or to suppliers, making you liable. If you haven't manufactured the product but it has your company name and logo on it, you could still be liable.

You're the repairer, and your repairs could cause further damage or injuries, and you would be liable. If the manufacturer is unknown or has stopped trading, you would become liable if you supplied the goods.

If you import goods from outside the EU, the business might not be subject to consumer laws, so the authorities could look to you for compensation.

Here are some scenarios that might make you liable:

You could pay less than £10 a month for product liability insurance, especially if you run a small business. The cost will depend on various factors, including the type of product you sell, your revenue, and the safety measures in place.

Electrical, sharp, heavy, medicinal, and some perishable products carry a high risk of causing injury, illness, or damage, which can increase your premiums. Having good product safety measures in place may help to reduce your premiums.

You'll also need to decide the level of cover you need, with most policies starting at about £1 million and offering cover up to £10 million.

Here are some key factors to consider when choosing a policy:

It's worth noting that product liability insurance is tax deductible as a necessary business expense.

You'll want to consider the cost of product liability insurance when deciding whether to take out a policy. The cost can be less than £10 a month for small businesses, but higher-risk companies can expect to pay more.

The type of product you sell plays a big role in determining your premiums. Electrical, sharp, heavy, medicinal, and some perishable products carry a higher risk of causing injury or damage.

Your revenue also affects your premiums, with more customers making you more exposed to risk. Having good product safety measures in place can help reduce your premiums.

Most policies start at around £1 million in coverage, but you can choose to go up to £10 million. It's worth considering bundling your product liability insurance with other policies, such as professional indemnity, public liability, and cyber insurance, to save money.

A commercial combined insurance policy can be a cost-effective option for covering multiple risks. Product liability insurance is also tax deductible as a necessary business expense.

Taking out a policy can be done online, allowing you to compare like-for-like quotes and apply for policies quickly.

You can also consider going through a broker to find more specialist cover, which may be beneficial for your specific needs.

It's essential to make sure all the risks that apply to you and your business are covered, just as you would with any other insurance policy.

Manufacturers have a legal responsibility to compensate buyers, users, and bystanders for damages or injuries caused by defects in goods purchased.

The Consumer Protection Act 1987 outlines strict laws concerning the selling or manufacturing of faulty or defective products, making manufacturers automatically liable for harm caused by defects.

Product liability insurance is a must-have for manufacturers to protect themselves from financial risks associated with product defects.

If a product is found to be defective or unsafe, manufacturers must cover the costs of recalling the product, which can be a significant financial burden.

Product recall insurance can help mitigate this financial risk by providing coverage for the costs associated with recalling a product from the market.

Machinery damage and business decisions can be a significant concern for UK businesses. MACH 3-5-7 insurance provides cover for industrial and commercial machinery, including operator error, for up to 7 years.

This type of insurance runs alongside your general insurance, not as a replacement, and offers far wider cover. It's a valuable addition to your business's risk management strategy.

In some cases, machinery damage can be a contributing factor to product liability claims. For example, if your business imports phone chargers from outside the EU and they give a customer an electric shock, you could be liable even though you didn't make the product.

Machinery damage can be a significant concern for business owners, especially if they're not prepared. MACH 3-5-7 insurance is specifically designed for operators of industrial and commercial machinery.

This type of insurance runs alongside your general insurance, not as a replacement, and provides far wider cover including operator error for a period of up to 7 years.

Having this insurance can give you peace of mind, knowing that you're protected in case of machinery damage.

If you're a business owner, you need to consider the potential risks of product liability. Even if you don't manufacture the products yourself, you could still be held responsible if they're faulty.

In the UK, employers' liability insurance is the only type of business insurance that's legally required, but product liability insurance is still a good idea.

If you import products from outside the EU, you could be liable for any faults or defects, even if you didn't make them. This is known as product liability.

If you're in a high-risk industry, such as manufacturing or healthcare, you may want to consider product liability insurance more seriously.

Here are some industries that are particularly prone to product liability concerns:

It's worth noting that this list is not exhaustive, but it gives you an idea of the types of businesses that may need to consider product liability insurance.