If your business
manufactures, distributes, or sells products, understanding the difference between
product liability insurance and
product recall insurance is critical.
While these coverages are often confused, they protect against
very different risks—and assuming one policy covers everything can leave costly gaps in protection.
Below, we’ll break down how each policy works, what they cover, and why many businesses need to evaluate both.
What Is Product Liability Insurance?
Product liability insurance helps protect your business if a product you make, sell, or distribute causes:
- Bodily injury
- Property damage
- Financial loss to a third party
If a customer is injured by a defective product and sues your business, product liability insurance can help cover:
- Legal defense costs
- Settlements or judgments
- Court-awarded damages
Is Product Liability Included in General Liability?
In many cases,
product liability coverage is included in a standard General Liability insurance policy.
However, for manufacturing businesses in
higher-risk industries—such as food producers, medical device companies, or chemical suppliers—product liability may need to be purchased as a
standalone policy with higher limits and more specific underwriting.
What Is Product Recall Insurance?
Product recall insurance helps cover the costs associated with
removing a defective or dangerous product from the market.
Unlike product liability insurance, recall coverage is focused on
operational and crisis costs, not lawsuits.
Product recall insurance may help cover expenses such as:
- Customer notification and communication
- Shipping and transportation costs
- Product disposal or destruction
- Replacement or repair costs
- Crisis management and public relations expenses
This coverage is especially important for businesses where a recall could result in
major financial loss or brand damage.
The Most Important Difference to Understand
A
product recall itself is NOT covered under product liability insurance.
Even if a defective product causes injuries and leads to lawsuits:
- Product liability insurance may cover the legal claims and damages
- Product recall insurance covers the cost of pulling the product from shelves
These are
two separate events requiring
two different coverages.
This distinction catches many businesses off guard—especially after their first recall.
Product Liability vs. Product Recall Insurance: Side-by-Side Comparison
Product Liability Insurance
- Covers lawsuits related to injury or property damage
- Focuses on third-party claims
- Often included in General Liability
- More commonly carried by businesses
Product Recall Insurance
- Covers costs to remove products from the market
- Focuses on operational and brand-protection expenses
- Typically purchased as a standalone policy
- More expensive and less commonly carried
Do You Need Both?
Not every business needs product recall insurance—but many
assume they’re covered when they’re not.
You may want to strongly consider recall coverage if you:
- Manufacture or distribute physical products
- Operate in food, beverage, supplement, or medical industries
- Sell products nationwide or internationally
- Would suffer significant financial loss from a recall
- Have contractual or regulatory recall requirements
A proper insurance review should evaluate
both exposures, not just liability claims.
Final Thoughts
Product liability insurance and product recall insurance serve
very different purposes, and one does not replace the other.
- Product liability protects you
after someone is harmed
- Product recall protects you
before the damage spreads further
Understanding this difference can help prevent costly surprises and ensure your business is properly protected.
Need Help Reviewing Your Coverage?
If you manufacture, distribute, or sell products and want help reviewing whether your current insurance properly addresses
both liability and recall risks, we’re happy to help.
Contact us to review your policies and make sure there are no gaps in your coverage.
