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Product Liability Insurance – The Much-Needed Protection for Every Business

By on Last modified: January 4, 2019

Product Liability Insurance
Imagine this scenario. A solar inverter caused a fire at a person’s home. After an investigation, the person brings on legal action against the importer of the solar system. This seems the logical step as somebody has to be taken responsible and pay the hundreds of dollars worth of damage to their home. However, is the importer really at fault when the defect happened during the manufacturing process?

If you’re importing goods in Australia, your company is legally regarded as the manufacturer. This means that you’re going to be exposed to claims from customers who have experienced property damage or personal injury caused by your products. Being hit by only a single claim can have detrimental effects on your company, especially if you’re a small-scale business. So, what can you do to protect yourself? The best solution will be to have a comprehensive product liability insurance in place.

When it comes to product liability insurance cost shouldn’t be an issue. After all, the sum you pay for being insured is nothing compared to the cost of settling a dispute. Remember, when hit by a lawsuit, there are many other expenses involved besides the compensation payment for the damages. There is also the cost of hiring attorneys, notaries and other hidden legal expenses. But if you’re protected by a product liability policy, the insurance company will pay for all financial repercussions including settlement costs and the additional legal expenses.

The product liability insurance policy will be applicable only if the damage is caused by the following reasons:

  • A manufacturing flaw – The defect in the product has originated at some point in the production process, rendering the product non-functional or hazardous.
  • A design flaw – The product was inherently unsafe and didn’t operate as advertised.
  • Defective instructions – The manufacturer failed to provide appropriate instruction of the usage of the product and failed to warn customers of certain risks which can result in damage or accidents.

The product liability insurance cost usually depends on the type of products being sold. Products containing hazardous materials or chemicals are usually more expensive to insure. In general, the total sum you need to pay for your insurance is usually calculated based on the insurance rate for the particular product times your annual sales. All in all, before signing up for a particular policy, it’s advisable to consult with a professional insurance broker to make sure your business has the right coverage in place.