Product Liability Insurance For Manufacturing Companies - The Basics

Product Liability Insurance For Manufacturing Companies - The Basics

Product liability insurance is one of the most important types of coverage for manufacturing companies. It protects your business if a product you make, sell, or distribute causes harm to a customer or damages property due to a defect, malfunction, or improper labeling.

In many cases, product liability coverage is included in a standard general liability policy. However, depending on what you manufacture, you may need a separate, more specialized policy to fully protect your business.

What Product Liability Insurance Covers

Product liability insurance typically covers claims related to:

• Defective products or components – flaws that occur during the manufacturing or assembly process.
• Malfunctioning or unsafe products – when a product fails to perform as intended and causes harm or damage.
• Contaminated or unsafe materials – especially relevant for food, beverage, and skincare manufacturers.

If your company is found liable for injuries, illnesses, or damages caused by one of your products, this coverage can help pay for legal defense costs, settlements, or judgments.

When You May Need Separate Product Liability Coverage

Not every business can rely solely on general liability insurance. Certain products carry higher risks and often require standalone product liability coverage, such as:

• Medical devices or supplements
• Critical automotive parts
• Certain food, beverage, or skincare products

These industries often face strict compliance and safety standards, and claims can become extremely costly if something goes wrong.

Product Liability vs. Product Recall Insurance

While both cover product-related risks, product recall insurance is separate. Product liability covers injury or property damage caused by a defective product, while product recall covers the costs of removing unsafe or defective products from the market—like transportation, disposal, and replacement.

Many manufacturers mistakenly assume recall coverage is included in their liability policy—it’s not. Both are worth discussing with your insurance advisor.

Industry-Specific Requirements and Exclusions

Some products—such as firearms, pharmaceuticals, or chemicals—may not be covered under standard liability policies due to their high-risk nature. Additionally, large retailers like Walmart, Target, or Amazon may require suppliers and manufacturers to carry specific limits of product liability insurance before doing business with them.

Understanding these requirements early helps ensure compliance and avoids costly gaps in coverage.

Final Thoughts

Product liability insurance is essential for any manufacturing company. It not only protects your business financially but also ensures you meet the insurance requirements of customers, suppliers, and retailers.

If you’re unsure whether your current policy provides adequate protection, it’s worth reviewing your coverage. Working with an experienced insurance advisor can help you understand your risks and make sure your business is properly protected.