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Product Liability Insurance & Completed Operations Coverage

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insurance > business insurance > product liability insurance & completed operations coverage


Introduction

The future as we know is hard to predict. No one has the ability to foresee what may happen and because of this fact, it is really important for business owners to be prepared.  A successful business owner, however, acknowledges that there are product problems, recalls, and defects, and takes the appropriate preventive steps, one of these steps is investing in Product Liability Insurance (USA).

So what is this “Product Liability Insurance” they talk about and how does it help your business in the future? Read on to know more!


Product Liability Insurance Definition

Product Liability Insurance is a type of general liability insurance designed to protect your business against financial and legal effects as a result of personal injury or harm to property due to the use of the products, goods or items sold by your company. Product Liability Insurance pays for the legal and court expenses of defending any lawsuits incurred by the product for physical injury, property damage, or financial loss. Let’s say a customer claimed that a baby stroller you sold her broke and caused her child to fall and get injured. You may be looking at a grave legal charge towards you and your company, one that could end up costing all your company's money and energy.

Additional information about product liability insurance:

1. There are dozens of product liability insurance companies that offer good and reliable services that you can avail to help you and your business. The best way to do that is to compare cheap product liability insurance quotes from trusted companies, which can be done easily through this page.

2. Product liability insurance for small businesses are significantly cheaper and more affordable compared to those of big businesses with more product liability coverage requirements.

3. Product liability insurance coverage is also known as general product liability insurance or product and liability insurance

4. Business product liability insurance is very important for businesses who are producing goods and services that may potentially cause any kind of damage to those using them. Some examples would be companies that sell firearms, cars and all food business


The Importance of Product Liability Insurance

It is absolutely important for you to avail Product Liability Insurance if your company sells any goods, products or services to the general public. There is no certainty that the products you are selling will not cause injury, harm or damage to a consumer or their property. Even if you are absolutely sure of the durability or quality of your goods/products. A customer who is dissatisfied may be capable of waging a long-lasting and expensive legal fight against your company and you that may even deplete you of your money, time and resources. Even if you're going to win the case, It is necessary to remember that cases of product liability are among the most costly to litigate.

For any financially responsible business owner, Product Liability Insurance makes sense to include. You never know what can happen when you place your goods in your customers ' hands. Product Liability Insurance enables you to have peace of mind that you will gain a powerful security net to fall back upon if anything were to happen. That is why it is important to consider this insurance since the pledge or product liability insurance policy/ product liability policy is truly helpful for your business’s future.

Some more examples of small business that should leverage product liability insurance coverage are:

1. Sellers of Beauty or Fragrance

2. Enterprises that sell appliances

3. Children's shops, including distributors of toys, apparel , footwear, tools,

4. Sellers of footwear and accessories

5. Producers, wholesalers, or distributors of food

6. Suppliers of home enhancement

7. Productors

8. Animal shops

9. The Resellers

10. Bakeries, bars , coffee shops, or niche food stores


Product Liability Insurance Coverage

There are various types of claims that a dissatisfied and upset customer may hold against your business that product liability insurance covers. Here are a few common claims:


Defect in Design

A defect in design claims that, from the creation of its conception, a product was defective or harmful. This is different from a production or manufacturing failure in that the origin of harm was not born from poor craftsmanship or production, but the underlying nature of the product was harmful in and of itself.

An example could be, a consumer purchases a book for children that contains a few beads on some of the pages. Because the beads are small in size, the child of the customer chokes on it. While a manufacturing or development fault could be alleged, the consumer may also argue that the book which was supposed to be for children from its nature was inherently hazardous. I.e., no small material that a child might choke on should be used in a children's toy.


Manufacturing or Production Flaw

As its name suggests, this kind of claim implies a fault in the manufacture or manufacturing of products that has produced a hazardous or dangerous product. Flaws in manufacturing or production are any defects that happen during the making of a product that establish a possible cause of serious bodily harm or injury, property harm or economic loss.

An example could be a customer who bought a pair of shoes or sandals from your company has lately slipped and hurt him/herself because of the heel not securely fastened into the sole of the shoe/sandal. She spends for medical costs due to her injury and has sued your company for creating a shoe that was unsafe for the public.

Without Product Liability Insurance, to overcome this allegation, the company will be entirely responsible for facing all the legal and court fees. In addition, if the consumer were to win the lawsuit, the company may also be responsible for the legal expenses and medical costs of the consumer, depending on the result of the dispute.

Defect in Marketing: Inaccurate/Defective Notices or Instructions

A consumer may take action against your business for not providing the requisite warnings about your product 's hazardous aspects. The assertion being that a company has not properly and reasonably informed the customer of all the possible apparent risks and damage that the item may cause.

Your company, for instance, sells handmade natural cosmetics. One of your skin creams that includes several harsh components that should not be applied or put into sensitive areas of the skin is purchased by a customer. She applies her eyelids with the ointment and experiences serious chemical scarring. Since the client has not been alerted or properly advised by your company, a claim could be made against you for incorrect or inaccurate warning/notice or instructions.

Strict Liability

Finally, strict liability in relation to the goods is probably the greatest source of fear for a company owner since it is the most unpredictable and toughest to predict or manage. Strict liability enables consumers to hold a business liable if they can assert a number of fair claims, even if the actual intention of the company was not to hurt the customer or to cause any injury or damage. In such a situation, notwithstanding the negligence or intent of the manufacturer to hurt, the manufacturer must bear the blame for a faulty product.


A person must prove any of the following in order for a consumer to prove strict liability:

1. That the item had a defect that was harmful to the user

2. That the item really caused physical harm, collateral damage, or psychological distress (that is, not only did the product have the potential to cause injury, but it really did)

3. The consumer's incident happened when he was using it for the purposes intended. For instance, instead of on his body, a customer used paint thinner for the purposes of thinning paint.

4. After the consumer's transaction, no major improvements were done to the product. For instance, the consumer could not argue that the fault was created by the company if a consumer smashed a mug and then injured his hand on the shattered parts.

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How Much Does Product Liability Insurance Cost?

The estimated average product liability insurance cost for small businesses is $700 a year, as part of a general liability insurance coverage. This is based on a product liability cost survey that covers small businesses with under $500k in annual sales in the manufacturing, wholesale, and retail sectors, with a general and product liability insurance coverage of $1 million / $2 million per year.

However, pricing varies depending on a variety of factors, including:

1. Business: Industry Businesses that work in high-risk sectors should anticipate to pay more in fees, such as pharmaceuticals.

2.  Goods and Products: Companies that manufacture high-risk products, such as insecticides or weapons, should expect to pay higher premiums.

3.  Yearly revenues: The more goods you sell, the greater the risk exposure your business faces, leading to higher premiums.


4.  Corporate function in product flow: You could be at greater risk of liability depending upon how your company falls in the overall stream of trade. Generally, suppliers would have higher premiums further down the supply chain than a company.

5.  History of claims: A history of repeated lawsuits will eventually raise the premiums, as with other insurance plans.

6.  Coverage Limits: The greater your coverage restrictions are, the more premiums you'll pay.

Everyone wants a cheap product liability insurance, it is achievable, yet it totally varies on how big or small your business is. There are many factors to consider so choose the best one that suits your business. 

It's best to get a product liability insurance quote from a reputable insurance company to get an accurate estimate on its cost for your exact business. You can easily compare product liability insurance quotes online from the most reliable business insurance companies through this page.

A few business insurance companies that offer Product Liability Insurance are highlighted below:

INSURER PRODUCT
Embroker 
Product Liability, General Liability 
The Hartford 
Product Liability, Goods Recall, Production Insurance 


Find more recommended companies that offer product liability coverage as part of their general liability insurance product along with their average cost and reviews on our big cheap business insurance research.


General Liability Insurance VS Product Liability Insurance

General Liability InsuranceProduct Liability Insurance
Definition

It is something that all businesses should have, whether of business , good, or purpose. You are protected by various legal threats, including: Injuries gotten on the premises, Property damage or damage caused to someone else's property by your business and marketing faults. 
Definition

Although general liability covers lawsuits related to operations, products, completed operations and your property, product liability insurance applies when claims involving the use of your products are made.


Pros 

-
Protection from the Unexpected
- You don't have to be scared of allegations of injury.
- You can protect your company and avoid spending money when something occurs.

Pros

- Your company will be protected against complaints and lawsuits from the consumer regarding your products.


- You won’t have to worry when you manufacture defective goods since your insurance has got you covered 
Cons

- In order to respond to a major judgment or complaint against you, you do not have adequate defense. To get better security than this policy can afford, you need to have extra coverage.

- Company owners also perceive this insurance to be another unnecessary expense associated with it.
Cons

- The related extra expense is the most widely cited justification for refusing product liability insurance.

- Some insurance firms are somewhat slow to answer to claims and are overly cautious in how claims are accepted.


Cost 

Regardless of coverage  limits, $42 a month ($500 annually) is the average price of general liability insurance.
Cost

The estimated cost of product liability insurance is around $0.25 per $100 of sales for goods in a low-risk category.

Based on the type of product you develop, manufacture, or sell and the annual income produced by your company, the real costs may be significantly higher or lower.

Product Liability Insurance Types

Product Liability Insurance For Food

Product liability insurance for food and food products covers those that manufacture, produce , distribute or sell food and food products against allegations of liability that may result towards consumer exposure to their items.

Product liability insurance for food products is best for food businesses who sell the following:

1. Supplements of Proteins 

2. Standard Supplements 

3. Food / Drink Importers 

4. Sweeteners Substitute 

5. The Herbal Supplements 

6. Products Based on Hemp

7. Nutraceutical Manufacturers


Aviation Products Liability Insurance

Aviation products liability insurance coverage protects the producer from civil liability on the part of third parties resulting from harm or injuries sustained as a result of a product failure.

As in all other aviation insurance, there needs to be an 'occurrence' that leads to physical harm or property damage to any third party. Based on the activities and threat profile of the particular manufacturer, coverage can also be expanded to include 'manufacturer's hull' exposures, and other aviation plans.

Product Liability Insurance For Distributors

In this sense, the word defective implies that the product might be poorly made or constructed or that the guidelines / warnings are uncertain to the consumer. This is somewhat different from laws focused on negligence, where a plaintiff must claim that the damage was caused by your negligence.

The cause of thousands of accidents every year in the United States is faulty or unsafe goods. Both product sellers in the distribution chain can be affected by liability for a product defect that results in injury. That is why it is important for distributors to acquire product liability insurance in order to protect you and your company. 


Extended Product Liability

Extended product liability insurance offers compensation for financial damage caused by industrial and commercial consumers on account of provisions of statutory liability resulting, for example, from:

- mixing damages, mixing losses, defects in workmanship.
- Damage done during further production or damage caused by processing (product protection)

- Dismantling and installation costs

- Damage from faulty computers, and optionally, damage from faulty machines

- Checking expenses and cost of sorting

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Completed Operations Liability Definition



Completed operations insurance protects the responsibility of a contractor to a third party for property loss or injury until contractual operations cease. Construction products and the manufacture of consumer products and drugs would normally be protected by completed operations.

Think about the two examples of the liabilities of contractors below. Melting snow reaches through the rooftop and destroys several network servers six months after a roofing contractor finishes working at a bank or on top of a car, a newly built overhead door closes up.
Both parties demand compensation for physical injuries and damage to property from the contractors. With this stated it is a safe decision to avail completed operations insurance for un-predicted possibilities. 


What is Products and Completed Operations Insurance and How it Works

In a completed operations insurance coverage, the insurance company offers legal protection to the contractor and accounts for any payment or legal action arising from injuries related to completed work covered. An example may be, whenever the contractor conducts the job poorly, the company pays for the reconstruction, replacement, or repair of properties. Deficiencies in the material used to make the infrastructure or a breakdown of the electronic or other internal device, leading to damage to buildings or the inhabitants of the building, may be resolved by the degree of coverage. Some plans cover the failure of the contractor to provide adequate notice on how the building and its systems are properly maintained and operated.

Products-Completed Operations Insurance, also known as Products and Completed Operations Liability or Products-Completed Operations Liability


The initial part of the coverage ('products') relates to manufacturers producing and selling products.

The other part ('completed operations') is for businesses performing installation or construction at the homes or businesses of customers.

That is why it is very crucial to consider getting products-completed operations insurance since it protects your products and you who might need it in the future.

Products-Completed Operations Coverage / Products and Completed Operations Coverage

Products-completed operation relates to your product liability claims coverage under a general liability insurance policy. It is also part of Business Owners Policy (BOP).

For small businesses, lawsuits involved in property damage and bodily accidents are common. If a product or service injures a person or real estate in your company, you could be facing a lawsuit. Under the "products-completed operations" chapter of your policy, this covers such losses.


Products Completed Operations Aggregate

Product-completed operations aggregate (products and completed operations aggregate) is the overall coverage in your general liability insurance or business owner's policy that helps protect you from financial loss if individuals or property are injured by your product or completed service. 


Importance of Completed Operations Insurance

Completed insurance policy for operations helps businesses contractors pay claims while sustaining their businesses' financial stability. It can cover against contract breach and claims of negligence. Completed operations coverage helps ensure rational compensation for damage done or injuries arising from the labor of the contractor or the product of a manufacturer. This type of insurance may compensate for punitive loss or damage assessed by a court. Insurance on completed operations does not cover situations of a product recall though.


References

https://www.iii.org/fact-statistic/facts-statistics-product-liability

https://en.wikipedia.org/wiki/Liability_insurance#Product

https://agr.mt.gov/Portals/168/Documents/Marketing/SellingtoRetail/Product_Liability_Insurance_Explained.pdf

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