Product liability insurance

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    At Swoop, we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. While we adhere to a strict editorial policy, our goal is to simplify complex matters, offer transparent information, unravel jargon, and empower businesses to confidently make smart financial decisions.
    Chris Godfrey

    Page written by Chris Godfrey. Last reviewed on January 4, 2024. Next review due April 6, 2025.

    No manufacturing process is perfect. Every business that designs, makes, or distributes parts, components, or finished goods runs the risk that the products they supply could harm someone or damage someone’s property. These injuries or damages could happen through no deliberate fault of your own, but a simple manufacturing flaw or workshop error could still make you and your business liable for compensation claims that measure in the tens or hundreds of thousands of pounds. 

    Fortunately, product liability insurance can protect your business from potentially catastrophic costs should the products you provide create a problem for your customers. Read on to find out more.

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      What is product liability insurance?

      Product liability insurance (PLI) – also known as ‘product insurance’ – is a business insurance designed to protect companies, partnerships, sole traders and the self-employed from financial loss in the event that someone is harmed, or property is damaged due to the products that they supply. 

      Important tip: Product liability insurance isn’t only for manufacturers. In the event of an accident, your business could be held liable even if you only distributed or repaired the product.

      What's the difference between product liability and public liability insurance?

      Public liability insurance covers your business for claims for personal injury or property damage arising from the services your organisation provides. Product liability insurance protects you from injury or property damage claims caused by any faulty products that your business has designed or supplied.

      Who needs product liability insurance?

      Suitable for SMEs, sole traders and the self-employed, product liability insurance is a must for any business that designs, manufactures or distributes:

      • Parts for finished goods 
      • Components for finished goods
      • Finished goods
      • Packaging for all of the above

      Your business could also be held liable even if you out-source your manufacturing and only put your name on the finished product, or you have repaired or refurbished a faulty product that caused injury or property damage. You may also be at risk if you import products from outside the European Union, cannot identify the original manufacturer, or they have gone bust leaving your business as the last man standing. 

      Why do I need product liability insurance? What could go wrong?

      It doesn’t take much to cause an accident. Even the smallest part or finished product has the potential to cause physical harm or property damage if it is faulty, fitted incorrectly, or wrongly supplied for purpose. For example – a manufacturer produces electrical components used in consumer hair dryers. A minor error in a wiring connector causes a short circuit that creates an electrical fire. The part is only worth a few pennies, but the compensation claims from the user who was burned could easily cost tens of thousands of pounds. Could your business survive such an issue?

      Is product liability insurance required by law?

      No. Only employers’ liability insurance is legally required. Other business insurances are optional, although some clients and distributors may require your organisation to have product liability insurance in place before they will trade with you.

      How much product liability insurance do I need?

      There is no real limit to the property damage or level of injury that faulty products can cause. As such, UK providers of parts, components and finished goods will typically insure themselves for £1million to £10million depending on the size of their business and the type of products they supply.

      What does product liability insurance cover?

      Product liability insurance protects against claims for:

      • Personal injuries caused by faulty or wrongly supplied product(s)
      • Loss of or damage to property caused by faulty or wrongly supplied product(s)
      • Unforeseeable circumstances such as product faults that quality control systems could not reasonably identify or foresee

      PL may not cover against:

      • Personal injury or property damage from faulty products caused by poor workmanship or negligence
      • Financial losses suffered by a person or business caused by your faulty product

      How much does product liability insurance cost?

      Premiums for product liability insurance can start at less than £4 per month, but costs will depend on your business type and the risks attached to what you sell, making every quote unique. 

      How Swoop can help

      All business involves risk, but that doesn’t mean you have to suffer the consequences if things go wrong. Don’t let a faulty product put your business in a spin. Contact Swoop today to compare top-quality product liability cover from different providers and to discuss all your business insurance needs. 

      Written by

      Chris Godfrey

      Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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