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Product liability insurance is currently one of the most demanded types of insurance in the industry, due to its extended coverage. As you may already know, this policy is designed for manufacturers who want to be fully protected against claims related to the production of foods, medicines and any other products intended for public use. In other words, if the manufacturer’s product is responsible for losses or injuries due to the malfunction of the product or to a fabrication defect, this type of policy basically protects the manufacturer against compensation claims and even the legal fees that may arise. It often happens that some products can become defective or they can malfunction without a warning, thus causing extensive damage and injuries either to the buyer or to those that surround him – this is why manufacturers usually take out a product liability insurance, to get the peace of mind they need and to avoid paying staggering sums of money.
This basically protects the company from being sued and being held legally liable for the injuries caused by the product. The good news is that most modern product liability policies cover both the legal costs and the payouts that this may involve, if the manufacturer is found guilty of the charges. Nonetheless, in spite of being very complex and very sought-after these days, customers must understand that there are some aspects that are not covered by the policy, such as intentional damage.
At the time being, this type of insurance is commonly taken out by medical practitioners who do not want to be held responsible for using a certain product for surgeries or treatments, product that may malfunction. If the product is faulty and it causes any damage to the patient, the doctor will not be held responsible for it.
Understanding Product Liability Insurance Better
In a nutshell, there are several notable aspects covered by this type of insurance, and one of the most common ones include manufacturing flaws. Just like the name implies, this is basically a claim against the manufacturer for creating and selling products with unsafe defects: this can involve either chemicals or dangerous features and functions of the product.
Flaws and issues can occur with the design of the product as well, and this usually refers to cars and trucks: if a vehicle’s design is deemed to be unsafe and it puts the passengers’ or driver’s life at risk, then the manufacturer may be hold liable for design defect. Last, but not least, the product liability insurance also protects manufacturers and business owners against lawsuits that target product instructions: nowadays, most products and services come with a user manual or with a set of warnings and instructions, but if the instructions are not comprehensive or sufficient or if the product or service in question has not been labelled properly, then customers can choose to sue the manufacturer.
What Type Of Damage Does The Product Liability Insurance Cover?
There is a wide array of potential damages that can occur after using a malfunctioning product, and if a manufacturer is sued the insurer can cover the medical costs, the attorney’s fees, the punitive damages and a wealth of other costs that the manufacturer would typically need to pay out of his own pocket. Generally speaking, product liability claims are very expensive and very aggressive, and not once did it happen for a massive lawsuit to put a manufacturer out of business for good.
Who Should Consider Taking Out Product Liability Insurance And How Much Does It Cost?
This type of insurance is very versatile and complex, and modern insurers can come up with a targeted and tailored plan of action that is especially designed to meet the requirements of each individual manufacturer. In spite of being personalized and very affordable at the same time, many business owners still fail to take out such a policy due to a series of reasons. In a nutshell, not only the manufacturers but also the resellers and the retailers should take this type of policy into account: despite the fact that third parties may not be responsible for the production flaws of the product, they can still be hold accountable for negligence and be dragged into a long and pricey lawsuit that can wreak havoc on their reputation.
To put it simple, all manufacturers and distributors of public goods should take this insurance into account, and it is extremely important for the insured to make sure that the policy is comprehensive enough and that it covers all the notable aspects of their business. As you may have figured out already, the price of this type of insurance is directly proportional to the number and the complexity of the aspects covered by the policy: the more sales a manufacturer managed to record, the higher the cost on the policy. At the same time, the type of product that is being commercialized plays a pivotal role as well: high-risk products also tend to cost more than low-risk products, given the fact that the customer is more likely to sue the manufacturer for a product that is more dangerous.
Regarding the cost of the policy, it can vary greatly depending on the geographical location, the volume of sales, the experience and background of the manufacturer and such: typically, the insurance can cost anywhere from several hundred dollars to several tens of thousands of dollars a year.
The Bottom Line
The bottom line is that the business that sells or manufactures a certain product is 100% responsible for the quality of the products in questions, and for any damage that may occur as a result of using those products. Manufacturers are legally responsible for what they produce, and this type of policy typically covers all the compensation costs on your behalf, if you are hold legally responsible – this is why thousands of manufacturers, sellers and retailers choose to take out such a policy and to stay on the safe side rather than to take any risk that can lead their business to bankruptcy or that can even send them to jail.
Author Bio: Jess Sands is a small business owner from Townsville, Australia.