Product Liability Insurance

What Is Product Liability Insurance?

Product liability insurance is a type of business insurance that protects companies from financial losses if a product they manufacture, sell, distribute, or import causes bodily injury or property damage to a third party.

Even if your business is not found at fault, legal claims can still be costly. This coverage helps pay for legal defense costs, settlements, and court judgments so your business can continue operating without major disruption.

What Is Product Liability Insurance For?

This coverage is designed to protect businesses from lawsuits and claims tied to defective, unsafe, or improperly labeled products.

If something goes wrong after a product leaves your hands, product liability insurance helps cover:

• Injuries or illnesses caused by a product
• Damage to third-party property
• Lawsuits alleging a product was dangerous or defective
• Legal defense costs

What Does It Cover?

If a product you manufacture, distribute, or sell causes harm, product liability insurance helps cover legal, medical, and settlement costs.

It protects your business from serious financial risk tied to how a product is designed, made, or marketed. Covered risks may include:

• Property damage
• Wrongful death
• Products manufactured, distributed, or sold by your business
• Design flaws
• Manufacturing defects
• Improper or missing warnings

Types of Product Liability Claims

Product-related lawsuits are more common than many business owners expect. In 2024 alone, product liability cases accounted for $13.7 billion in verdicts¹.

Most claims fall into three main categories:

• Design defects
• Manufacturing defects
• Failure to warn (marketing defects)

Understanding these risks can help you identify where your business may be most exposed.

What Is Not Covered

While product liability insurance offers important protection, it does not cover every type of loss. Common exclusions include:

• Product recall costs
• Employee injuries
• Damage to your own products or property
• False advertising claims
• Intentional misconduct

Knowing these limitations helps you build a more complete insurance strategy.

Who Needs Product Liability Insurance?

Any business involved in bringing products to market can benefit from this coverage. This includes:

• Manufacturers and producers
• Wholesalers and distributors
• Retailers and online sellers
• Importers
• Businesses that repair or rebrand products

If your business touches a product at any point in its lifecycle, you take on potential liability.

Is It Required?

Product liability insurance is not legally required in most states. However, many retailers, online marketplaces, and business partners require it before allowing you to sell or distribute products.

In practice, it often becomes a necessary part of doing business.

Product Liability Insurance Cost

The cost of product liability insurance varies based on several factors, including your product type, revenue, claims history, distribution channels, and overall risk level.

Many businesses include this coverage as part of a commercial general liability policy, making it a practical starting point when building an insurance plan.

Get Product Liability Insurance 

Your Gild Insurance Agent is here to understand your business and find the right coverage tailored to your needs.

For a free, online quote in minutes, try out Gildber! The fast, hassle-free option for a business insurance. 

1. https://www.iii.org/fact-statistic/facts-statistics-product-liability ↩︎