Product Liability Insurance

Product liability insurance is a type of insurance policy that offers coverage for legal liabilities arising out of damage or injury caused to a third party due to a product manufactured by the insured business. It covers legal and financial liabilities because of illness, bodily injury or accidental death to a third party or third-party property damage.

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Liability from Product or Service
Property damage or Bodily Injury
Medical & Legal Costs Covered

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Due to rising economic uncertainties, the need for an insurance policy today has become vital.  It provides financial assistance to customers under emergency situations. It works no less than a safety blanket, protecting the policyholder from various concerns that may arise. There are various insurance policies available based on the different needs and requirements of the customers. 

People commonly purchase heath, travel and life insurance plans, whereas, there are other specific plans available, pertaining to the unique needs of the customers.  People, who need coverage for certain specific issues, purchase these optimized insurance plans and Product Liability Insurance is one such specific plan.  Check out the details of Product liability insurance in detail below:

What is Product Liability Insurance Policy?

A product liability insurance policy would offer coverage against party claims or claims against the company, and not in the name of the person.  If a claim is made, then the insurance provider is liable to defend the case of the policyholder i.e. the business production.

Usually, business owners purchase professional liability insurance to secure them against legal and financial risks or troubles that may arise due to negligence, or injury as a result of the using the product manufactured by the insured business. This will safeguard the insured person against legal pay-outs and outlays for which he may be accountable. Remember that contractual liabilities and deliberate destruction would not be given a cover, under the policy.

Product liability Insurance in India was originally ideated by companies or businessmen who experienced a set of similar risks. Thus, this policy was introduced to cover those risks, in order to help each other address those issues.

Why do You Need Product Liability Insurance in India?

Product liability insurance policy is paramount for business owners, product manufactures, pharmaceuticals and even hospitals. A product liability insurance policy is usually acquired by enterprises or individuals, who might be held accountable for legal or financial liabilities, apart from other relevant issues. 

For instance, a product company has been sued for promoting sales of defective products, causing damage to the user or other products. In such a situation, if the manufacturer has product liability insurance policy handy, then the insurance provider would recompense the consequent legal costs.

This is imperative for companies manufacturing chemical products, pharmaceuticals, tobacco, foods and beverages, entertainment etc.  This one is not mandatory but holds relevance for certain industries. If you are one of them, you must not miss out on it.

Product Liability Insurance Plans

Based on your profession and business requirements, you can select a product liability insurance plan, available from different insurance providers. A product liability insurance policy usually provides cover for Third-party, Public entities, and Product.

Third-Party Product Liability Cover:

In case, there is any damaged caused to a third person, company or property; then the insurance policy would cover the loss or damage caused by the product.  The first party is the policyholder, the insurance provider is the second party, and the victim is the third person or the company who has made the claim against the loss or damage caused by the usage of the product.

Product Liability Cover for Public:

Procuring a product liability insurance cover is mandatory only in some countries. But it’s advisable that industries, having an impact on third parties including entertainment, food and beverage industries etc. should buy it, to protect themselves against any unnecessary risk. 

Product Liability Insurance Premium

The premium for product liability insurance plans is usually higher than other insurance plans, but, in the event of any claims, the premium costs would be lower than the cost of legal troubles. For that reason, buying this insurance policy is imperative too.

Places which are at higher risk include public places like chemical industries, alcohol manufacturers, tobacco, etc. If the nature of your product involves unusual risks, then your insurance provider can also refuse to process your claim. You might have to pay an exorbitant amount to compensate for the loss. 

Scope of Coverage Under Public Liability Insurance Coverage

A product liability insurance policy covers the claims arising due to the following reasons:

  • Injuries, accidents, and damages occurring due to the used of the product
  • Defects in product including manufacturing defect, faulty packaging, instructions to use the product, delivery specifications etc.
  • Some policies cover sales turnover of the insured company‐ both exports and domestic
  • To process claims, the claim intimation should be made in written to the insurer

Product Liability Insurance Add-on Covers

The policy can be further enhanced with the following benefits:

  • You can get additional coverage for liabilities arising out of judgments or settlements made in countries operation under the laws of Canada/U.S. A by opting for the North American Jurisdiction Clause
  • You can get additional coverage for liabilities arising due to the distribution and sale of insured products by vendors (named or unnamed vendor) with warranty and product usage instructions as given by the manufacturer.
  • Enhancement of coverage that covers legal exposures resulting due to sudden and accidental pollution, transportation, natural disasters and more

Product Liability Insurance Limitations:

A product liability policy shall not cover the following claims:

  • A product liability policy does not cover claims arising due to product recall, product guarantee, loss of goodwill etc.
  • Cost incurred on reconditioning or repairing or modifying the defective product or product parts

How to File Claim for a Product Liability Insurance Policy?

The claim procedure for product liability insurance plans may vary as per the insurance provider. 

  • Primarily, you would need to provide a copy of all the necessary documents to process the application. You need to fill the claim form, duly signed by you.  
  • The claim procedure might be little longer for liabilities, involving the settlement of court cases and legal jurisdiction. 
  • Depending on the nature of the claim, you need to check with your insurance provider for claim procedure.  

Product Liability Insurance- FAQS

  • How to calculate the premium amount for Product Liability Insurance? 

    The premium for a product liability insurance policy depends on the following parameters-

    • The nature of the product manufactured, and the risk involved also determines the amount of premium. The higher the risk, the more the premium and vice versa. 
    • It also depends on the company’s claim history; risk factors involved and the company’s approach towards handling those risks.
    • Your business record is also a deciding factor while calculating premium amount.
    • Every insurance company calculates the premium amount as per the base rate based on the requirements and assessments. 
  • What is not covered in a liability insurance policy?

    The insurer will not offer compensation under the following circumstances-

    • Any deliberate attempt of non-compliance towards legal or legitimate provisions.
    • Damage caused to a property owned by the policyholder. Also, if the property is on lease or on loan under the insured person’s name.
    • Loss or damage arising due to war situations, raid, civil war, rebellion, insurgency or military attack.
    • Any loss or damage resulting from the direct or indirect impact of radioactivity, Ionizing radiation, nuclear waste, hazardous explosives, thereof.
  • Are contractual liabilities covered under product liability insurance?

    No, contractual liabilities are not given a cover under product liability insurance policy. 

  • Can I opt for excess in a product liability policy?

     Yes, you can opt for excess and the percentage will vary from one insurance provider to another.

  • Can I opt for add-on covers in a product liability policy?

    Yes, you can opt for add-on covers that offer compensation for named and unnamed vendors, countries operating under different laws, etc.

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