If you are the owner of a small business that sells products, you may be at risk of causing injury to a person or damaging property. If someone, for instance, buys a tool from you, they could get injured and sue your business.

General liability insurance can help cover medical costs to treat the injury, legal fees, and expenses to defend the business, and judgments or settlements made against the business. However, you may sometimes need product liability insurance (PLI).

Without the coverage, you would be forced to pay for the costs out of pocket. In addition, you may have limited resources big corporations can tap into as a small business. As such, you could go out of business or significantly lose momentum from such lawsuits unless you have product liability insurance to protect your business.

How Does Product Liability Insurance Help Small Businesses?

If you manufacture or sell items, your company may be held accountable for the costs of product liability lawsuits if your product causes injury to a consumer—even if the customer misuses the product. Product liability insurance protects you against legal and financial consequences.

It offers third-party coverage, which means that losses are paid to people who have been harmed or injured rather than your company. (In this situation, the person harmed is the third party, and your company is the first.)

What Kind of Lawsuits can Small Businesses Protect Themselves From With PLI?

Product liability lawsuits are filed by a customer against a seller or manufacturer, alleging that some part of their product was faulty, dangerous, or caused an injury. For example, the flaw might be in the following:

•  The product's design.
• Manufacturing errors that occur during development or manufacture.
• Marketing flaws, such as incorrect instructions or omitted warnings.

A retailer can be held liable for defective products and can be held accountable even if they are not culpable.

Product responsibility is a "strict liability" violation, which means that even if you, the maker or supplier, used extreme caution, you might still be held accountable for harm regardless of your intention. In addition to that, the policy protects both the business and customers.

It ensures that you do not have to pay for anything out of pocket and that the customer can get compensated for having undergone injury.

What Can and Can't Small Businesses Cover Using Product Liability Insurance?

Product liability insurance covers the costs of an accident or property damage claim. This includes your legal expenses, court settlements or judgments, and any medical expenditures incurred by the injured party.

However, it does not apply to:

• Tech products: Product responsibility only applies to physical injury, not digital harm. Any damage caused by technological goods necessitates the purchase of errors and omissions insurance (which covers damages incurred by your client as a result of your errors) or a professional liability insurance cover.
• Employee injuries: Workers' compensation insurance covers accidents and lost pay.
• Customer injuries: General liability insurance covers customer injuries in your business location, such as slip and fall injuries.
• Product recalls: If a customer injury results in a product recall, you'll require specialized product recall insurance.
• Accidents involving commercial vehicles: Accidents involving commercial vehicles are covered by commercial auto insurance.
• Property damage: While professional liability coverage addresses harm to other people's property induced by your goods, commercial property insurance protects your property from damage.

Small Businesses that Benefit From PLI

Generally, any business that sells a product needs product liability insurance. Some of the most prevalent operations in need of PLI include:

• Manufacturers
• Tradespeople
• Retail, wholesale, and distribution
• Food services
• Beauty and cosmetics
• Online sellers
• Restaurants

These are only some of the kinds of businesses that this policy can cover. You can also protect your business if contracting or construction to cover negligence claims, delayed delivery, poor work, and unfinished projects.

What Small Businesses Should Know About the Cost of PLI

According to AdvisorSmith, a website that assesses small-business insurance and other products, the yearly average expense for product liability insurance is roughly $1,200 for small businesses with less than $1 million in annual revenue in the wholesale, retail, and manufacturing sectors.

Each insurance quote will be slightly different, but comparing prices will be easier if they offer equivalent coverage limits and premiums. You may compare their costs, coverage limitations, ratings, deductibles, and other features.

To obtain the estimates required to make a decision, you should begin by obtaining many quotes and examining whether you can combine general liability, business disruption, and commercial property insurance into a unified, more affordable plan.

The insurer has criteria determining how much you have to pay in premiums. That includes:

• Sales- The more stuff you sell, the more you pay for insurance because the risk (if any) is divided among numerous clients.
• Claims history- if you have a history of filing claims, your rates will likely be higher.
• Your position in the supply chain- A distributor does not have to pay as much as a manufacturer since their liability is limited to how they manage their specific job on the chain. Still, the manufacturer is responsible for actually manufacturing the goods.
• Coverage limits- The more coverage you require, the higher your premiums. 

Augment Your General Liability Insurance

Some level of product liability coverage should be incorporated if you already have general liability insurance. For example, a commercial general liability cover protects business owners if one of their items or completed projects is later claimed to have injured someone.

However, it would help if you considered acquiring additional product liability insurance coverage to include various product-related concerns, product recall insurance, and more.

The best commercial insurers can help you find insurance for your business. You can request a quote and purchase product liability insurance by comparing the prices between different providers. If you can talk to a representative, that will help you discover more about what is offered and make the best choice.