Product liability insurance is a critical component for businesses manufacturing or selling products. It safeguards against potential financial losses from legal claims due to product defects or failures.
What Is Product Liability Insurance?
Product liability insurance is a type of coverage that protects businesses from financial losses resulting from third-party claims related to their products. These claims may arise from injuries, property damage or other losses caused by a defective product. Product liability insurance can help cover legal expenses, settlement costs and other associated liabilities.
Key Components of Product Liability Insurance
The following are the critical components of product liability insurance:
- Various coverage protections—Product liability insurance can help cover numerous situations, including those related to product defects and improper warning labels.
- Legal defense—In the event of a claim, product liability insurance may provide funds for legal defense, covering attorney fees, court costs and other related expenses.
- Settlements and judgments—If the business is liable for damages, insurance can cover settlement amounts or court-ordered judgments up to the policy’s limits.
- Medical expenses—Product liability insurance may cover medical expenses incurred by individuals who have suffered injuries due to a defective product.
How Does Product Liability Insurance Work?
To secure product liability insurance, businesses must obtain a policy customized to their industry, encompassing the specific products they manufacture or sell and the associated risk exposure. Insurers conduct a thorough risk assessment, evaluating factors such as the nature of the product, its intended use and the safety protocols in place within the business. These assessments influence the premium, the cost of which is often determined by the level of risk identified.
Policies come with coverage limits, signifying the maximum amount the insurer will pay, and may involve deductibles, requiring the business to contribute a specified amount before the insurance coverage becomes effective. In the event of a claim, the insurance company initiates a meticulous investigation to ascertain the claim’s validity and scope, potentially collaborating with legal professionals and industry experts.
Should legal action ensue, the insurance company provides the necessary financial support for legal defense, encompassing activities like hiring attorneys, gathering evidence and representing the insured in court.
Product Liability Insurance in Minnetonka, MN
Contact Sebrite Agency to discuss your business insurance needs. We can make coverage recommendations based on your specific operations.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.