Product liability insurance covers the cost of compensating anyone who is injured by a faulty product that your business designs, manufactures or supplies.

Do I need it?

You should consider product liability insurance if your business designs, manufactures or supplies a physical product that is sold or given away for free.

Your business may be held legally responsible for any injuries to people or damage to property caused by a faulty product.

You can be held liable for faulty products even if you did not manufacture them. You may be liable for compensation if:

  • your business’s name is on the product
  • your business repairs, refurbishes or changes a product
  • you imported the product from outside the European Union
  • you cannot identify the product’s manufacturer, or the manufacturer has gone out of business

What it covers

Product liability insurance protects you against the cost of compensation for:

  • personal injuries caused by your faulty product
  • loss of or damage to property caused by your faulty product
  • unforeseeable circumstances such as product faults that your quality control system could not identify

Product liability insurance may not cover you for:

  • faulty products resulting from bad workmanship
  • financial losses to a business or person caused by your faulty product

If you do not manufacture the product but you distribute it, you should be covered if you can show that:

  • the products were faulty when they were supplied to you
  • you gave customers adequate safety instructions and warnings about misuse
  • you included terms for the return of faulty goods to the manufacturer
  • your supply contact with the manufacturer covers product safety, quality control and returns
  • you have good quality control and record-keeping systems

Buying product liability insurance

You can buy product liability insurance directly from an insurer or from a specialist broker through the British Insurance Brokers’ Association (BIBA). Most businesses take out policies that cover them for compensation claims of between £1 million and £5 million.