Understanding the Difference Between Product Liability and General Liability Insurance

For businesses who manufacture and sell their own products, there’s always the lingering threat of risk associated with their business. The off-chance that one of their products could fail or malfunction, causing an injury or pain in some way is not something that companies want to think about, but should be aware of.

From allergic reactions to small pieces being swallowed to clothes that could in fact suffocate children, there are plenty of product liability risks to keep in mind. This is why companies who manufacture products of any kind should be aware of the proper insurance coverage to protect their company in the event of being held responsible for issues. Most companies may lunge for a general liability policy, but did you know that product liability is specifically made for things like malfunctioned products? Let’s take a look at the difference between them.

Can I Just Get General Liability Insurance?

Also known as business liability insurance, general liability insurance protects companies and their business from general claims involving bodily injuries and property damage. While it may seem that this can handle the claims of product liability, product liability insurance is more specialized.

General liability insurance is something all companies need to have because of its overarching coverage. But it’s more of a broad take on covering your company’s production. General liability can help cover medical expenses and attorney fees resulting from bodily injuries and property damage for which your company may be legally responsible.

But while this kind of coverage sounds like it covers every possible risk, it really only takes care of some top-level issues like slips and falls and false advertising. This is why companies need to invest in a separate specialized program to supplement their insurance protection needs.

What is Product Liability?

Getting hit with a product liability lawsuit is something that can break a company’s bank. In fact, the median total cost of payout for a jury award is around $1.5 million, which means that product liability insurance is increasingly becoming a necessity for companies, given the high price, the rise in claims, and the costly legal fees associated with lawsuits.

Product liability insurance is covered under a general liability policy in conjunction with liability work that has been completed. This kind of coverage, which is included in bodily injury and property damage liability, is a combined piece of protection known as products-completed operations ability.

Businesses that manufacture potentially hazardous products, like clothes, pharmaceuticals or insecticides, may have a lot of risk on their hands when these products are sold. These companies may in fact have a hard time obtaining product liability insurance from a standard insurer and purchase coverage separately from a specialty insurer.

How Much Product Liability Insurance is Needed?

The amount of product liability insurance purchased is based on what and how many products your company sells, as well as volume of sales and number of parties involved in overall production. If your company manufactures products at a high rate, such as mass-producing toys or clothes, then the greater the likelihood you could have some type of defect.

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