Product Liability Insurance Cost


Written by:  Howmuchisit.org Staff
Last Updated:  August 13, 2018

A product liability insurance policy is designed in a way to protect a business from a lawsuit in the case the product causes either bodily injury harm and/or property damage.

If you sell any type of product to the public, your liability risk can be quite high, and if you’re not covered, the average lawsuit can cost you well into the five or even six+ figures.

Being important, some supply chains may not work with you unless you show proof of this insurance coverage.

Product Liability Insurance Cost
Bits” (CC BY 2.0) by massmatt

How much does product liability insurance cost?

The average cost of product liability insurance, based on our research, will depend on your company profile, the industry you’re working in, your revenue, the products and/or services you sell and the size of the business, to name a few.  According to Insureon.com, a company that offers this type of insurance policy, notes the average policy is $576.09, with product liability insurance often included in a general liability policy.  Some manufacturers, again, based on the factors mentioned prior, as well as the factors mentioned below, can often increase the premiums well past $1,000+ per year.

Some experts, to make the calculation easy, recommend multiplying 0.025% by your annual revenue numbers.  If you had $5 million in revenue, for example, then your total premium could be about $1,250 as long as you had a clean history.

Factors affecting the cost

The type of business/product:  Some industries, as you can imagine, can be much riskier than another.  A baby product or medical device-like product could cost much more to insure in comparison to something such as telephone case.  Your results will vary and any good insurance agent will be able to provide info as to how “risky” your product could be.

Size of your business and number of products:  The larger your business is and the number of products you need to insure, the higher your premium will be, of course, but this price “per product” may drop as a bulk discount depending on the insurer.

Geographical location:  As with anything, your geographical location can greatly affect the price as your property value and the local laws can greatly drive your insurance costs up.

Value:  Your company’s value can play a role as well.  Why?  Companies that have a lot of money are often a larger target than a mom and pop establishment up the road.

Claims:  How many claims are on your record?  Like any insurance policy, the more claims you have, the higher your premiums could be.

Limits:  Again, like all insurance policies, increasing or decreasing your coverage limits and deductibles, to name a few can increase and decrease your annual premiums.

State required limits:  All states will have its own laws and the minimums in one state could be much higher than the next.

What is product liability insurance?

A product liability insurance policy will protect the manufacturer, supplier, distributor, importer or the retailer from any claims that are made for injuries and/or damages which were due to the use of the said product.  This specialty insurance policy, either purchased on its own or as a supplement for your general liability policy, can also cover any sort of tampering, contamination, recall costs and/or crisis management expenses in some cases.

How to save on product liability insurance

Safety policies:  Be sure to focus on the safety of your products as the lower your risks are, the fewer claims you will have.  This, in turn, will lower your annual premiums and effectively reduce the chances of lawsuits in the future.  If need be, talk with a professional or consultant in your area to see how you can offer the safest product on the market.

Watch the coverage:  Like a homeowners or car insurance policy, you may be able to increase your deductible and potentially save hundreds or even thousands per month if you find the right “middle ground.”  Do not have too much coverage or too little as this may be unnecessary for your budget.

Compare:  There are hundreds of companies out there that want to insure your products.  As with any purchase, be sure to comparison shop to make sure you’re making the right choice, both financially and coverage wise.

What does product liability insurance cover and not cover?

It covers… bodily injury in the event someone was wrongfully injured by your product or in the case your product caused property damage.  It can also cover foodborne illnesses.  If a jury awards the victim, then your insurance should cover the cost of any lost wages, damages, repairs, care, legal fees and/or the restitution for death.  This is very broad, so be sure to know your inclusions with your insurance company as they all do vary.

It does not cover… quality control, product failure, failing to report changes and forbidden materials.  It also will not cover employee injuries, product recalls, damage to your products, lost inventory and/or professional liabilities — basically anything that can be covered under another policy.  For instance, if you made a change in your product and/or your product failed to perform its function, then your insurance policy probably will not cover you.  The same can be said if you use a “forbidden” ingredient inside of your product, even if your insurance carrier approved you initially.  Again, check with your insurance agent to know what is not covered to be sure you’re not open to any surprises in the future.


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