What Manufacturer Liability Insurance Covers And Why Your Business Needs It

4 October 2023

Robin Wells

If you're in the business of manufacturing physical goods, whether it be toys, electronics, or food products, then you know the importance of ensuring your products are safe for consumers. However, accidents can happen, and if one of your products ends up causing harm to someone, you could find yourself facing a potential lawsuit. That's where manufacturer liability insurance comes in — it provides protection against such scenarios. Explore what manufacturer liability insurance covers and why it's a necessary investment for any manufacturing business.

What Is Manufacturer Liability Insurance?

Manufacturer liability insurance protects manufacturers from financial losses due to lawsuits filed against them due to damages or injuries caused by their products. This can include compensatory damages, legal fees, and other costs associated with the lawsuit. It's important to note that manufacturer liability insurance only covers damages or injuries resulting from the use of your product — it does not cover damages or injuries resulting from services or advice given by your business.

What Does It Cover?

Manufacturer liability insurance typically covers three types of damages: compensatory, general, and punitive. Compensatory damages refer to the actual damages suffered by the plaintiff, such as medical expenses, lost wages, and pain and suffering. General damages refer to damages that can't be quantified, such as emotional distress. Manufacturer liability insurance can also cover the cost of legal fees, including those incurred in the defense of false claims.

Why Do Manufacturers Need It?

Manufacturers face a significant risk of liability claims since their products are potentially being used by a large number of people. Even if you think you have taken all the necessary steps to ensure product safety, accidents and defects can still occur. Without manufacturer liability insurance, your business could suffer financial losses in the event of a lawsuit. A single lawsuit could potentially bankrupt a small business, costing millions in legal fees and settlements.

How Much Does It Cost?

The cost of manufacturer liability insurance can vary depending on the type of products you manufacture, the size of your business, and your claims history. However, in general, the cost of manufacturer liability insurance is relatively affordable when compared to the potential cost of a lawsuit. Most insurance policies will provide different levels of coverage to suit various business sizes and needs.

How to Choose the Right Coverage

When shopping for manufacturer liability insurance, it's important to work with an experienced insurance provider who understands the specific risks of your manufacturing business. 

Contact a professional to learn more about manufacturer liability insurance. 

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