Product Liability Insurance protects your business when a product you make, sell, or distribute causes bodily injury or property damage. It can help cover legal defense costs, settlements, and court judgments tied to claims that your product caused harm.

This coverage matters because product liability risk comes with selling physical products. Under U.S. law, responsibility doesn’t stop with the manufacturer. Importers, distributors, retailers, and brand owners are routinely named in claims, even when they didn’t design or produce the product. A company can follow quality standards and still face a lawsuit.

For growing companies, Product Liability Insurance is often foundational to scale. Enterprise customers, marketplaces, distributors, and regulators commonly expect it. An uncovered claim can disrupt operations, delay partnerships, and pull leadership attention away at critical moments. The right coverage makes product risk manageable, so growth doesn’t hinge on a single incident.

Key Takeaways

• Product Liability Insurance protects against third-party bodily injury and property damage claims tied to your products.
• Liability often extends beyond manufacturers. Importers, sellers, distributors, and brand owners can be named in lawsuits.
• Product claims can be expensive even before fault is determined because legal defense and expert costs add up fast.
• Product Liability Insurance doesn’t cover recalls, warranties, or pure financial loss without bodily injury or property damage.
• Coverage works best when it’s coordinated with General Liability Insurance, Errors and Omissions (E&O) Insurance, Cyber Insurance, and Directors and Officers (D&O) Insurance.

What Is Product Liability Insurance?

Product Liability Insurance is business liability coverage that responds when a product causes bodily injury or property damage after it’s been sold or distributed. It helps protect your company financially by covering legal defense costs and, when applicable, settlements or court judgments.

The key issue is scope. Product Liability Insurance doesn’t apply only to companies that manufacture products. Any business involved in bringing a product to market can be held liable, including designers, importers, distributors, wholesalers, and retailers. In practice, lawsuits often name every party in the supply chain, especially when the original manufacturer is overseas, insolvent, or difficult to pursue.

In the U.S., many product liability claims follow strict liability standards. That means an injured party typically doesn’t need to prove negligence. They usually need to show that:

• The product was defective or unreasonably dangerous
• The defect existed when the product left the company’s control
• The defect caused bodily injury or property damage

As a result, even companies with strong testing, compliance, and quality control can face meaningful exposure. Product Liability Insurance exists to absorb that risk and prevent a single incident from becoming a company-level disruption.

It’s also important to understand what Product Liability Insurance isn’t. It isn’t a product warranty, and it doesn’t guarantee performance. It doesn’t cover refunds, repairs, or replacement of defective goods. Coverage applies when a product failure leads to physical harm or property damage that creates legal and financial consequences.

For modern businesses, Product Liability Insurance plays both a protective and strategic role. It helps manage downside risk while signaling to customers, partners, and regulators that you’re prepared to stand behind your products as you grow.

What Does Product Liability Insurance Cover?

Product Liability Insurance covers third-party bodily injury and property damage caused by products after they’ve been sold, distributed, or put into use. When a claim alleges that a product was defective or unsafe, this coverage is designed to respond.

Bodily Injury Caused by a Product

If a product causes physical harm, Product Liability Insurance can help cover medical expenses, rehabilitation costs, and damages tied to pain and suffering. In severe cases, it may also respond to wrongful death claims brought by surviving family members.

Property Damage Caused by a Product

If a product malfunctions and damages someone else’s property, Product Liability Insurance can cover the cost to repair or replace that property. Common examples include electronics that start fires, equipment that causes water damage, or components that fail and damage surrounding systems.

Legal Defense Costs

Product claims are expensive to defend, even when they lack merit. Coverage typically includes attorney fees, expert witnesses, court costs, and settlement negotiations. Defense costs alone can reach six figures, which is why this portion of coverage matters as much as the limit itself.

Settlements and Judgments

If a claim results in a settlement or court judgment, Product Liability Insurance pays covered damages up to the policy’s limits. This helps ensure a single incident doesn’t threaten the company’s financial stability.

Coverage for Different Types of Product Defects

Coverage generally applies whether the alleged defect involves:

• Design defects, where the product is inherently unsafe
• Manufacturing defects, affecting specific units or batches
• Failure to warn or label properly, such as missing instructions or inadequate safety warnings

Product Liability Insurance focuses on the consequences of a defective product, not the product itself. If a product breaks or fails without causing bodily injury or property damage, the policy usually won’t respond. Once that failure leads to physical harm or property loss, coverage may be triggered.

What Doesn’t Product Liability Insurance Cover?

Product Liability Insurance addresses injury and damage claims, not every cost associated with a defective product. Understanding exclusions helps avoid false assumptions and supports a program that holds up when something goes wrong.

Product Recalls and Withdrawal Costs

Standard Product Liability Insurance typically doesn’t cover the cost of recalling a product. Customer notifications, shipping, refunds, repairs, disposal, and crisis communications are usually excluded. Liability coverage may still apply if a recalled product caused injury or property damage, but the recall process itself requires separate coverage.

Warranty and Performance Failures

If a product fails to work as intended but doesn’t cause bodily injury or property damage, Product Liability Insurance typically won’t respond. Refunds, replacements, and dissatisfaction claims fall outside the scope of this coverage.

Pure Financial or Economic Loss

Product Liability Insurance covers physical harm, not economic loss alone. If a defect leads to lost profits, contractual disputes, or business interruption without bodily injury or property damage, other policies may be more relevant, such as Errors and Omissions Insurance.

Intentional or Illegal Conduct

Coverage doesn’t apply to deliberate wrongdoing, fraud, or knowing safety violations. Product Liability Insurance is designed for accidental failures, not willful misconduct.

Injuries to Employees

Employee injuries tied to work typically fall under Workers’ Compensation Insurance, not Product Liability Insurance.

Damage to Your Own Property

Product Liability Insurance applies to third-party claims. Damage to your own inventory, equipment, or facilities is typically covered under Property Insurance, not product liability coverage.

Who Needs Product Liability Insurance?

Product Liability Insurance is essential for any business involved in bringing a physical product to market. That exposure isn’t limited to manufacturers. If your company designs, imports, distributes, sells, or rebrands a product, you can be held liable if it causes bodily injury or property damage, even if you didn’t produce it yourself.

In practice, lawsuits often name every party in the supply chain. Plaintiffs typically pursue the most accessible defendants first, and responsibility is sorted out later. For growing companies, this makes Product Liability Insurance a baseline requirement, not an edge case.

Manufacturing, Hardware, and IoT Companies

Physical technology products can fail in ways that create direct injury or property damage, especially when batteries, automation, moving parts, or safety-critical environments are involved. As products move from prototype to scaled deployment, liability risk increases quickly.

Life Sciences, Biotech, and Digital Health Companies

When physical devices, consumables, or health-related products are involved, product liability exposure can be high severity and long tail. Coverage is often required to partner with manufacturers, healthcare systems, distributors, and clinical trial organizations.

eCommerce Brands and Consumer Product Companies

Sellers are often among the first parties named in claims, especially for imported products. Marketplaces, fulfillment partners, and retailers frequently require Product Liability Insurance before listing or carrying products.

Technology Companies with Embedded or Physical Products

Pure software companies typically don’t need Product Liability Insurance. That line blurs when software or AI influences physical outcomes through robotics, IoT, connected devices, or safety-critical systems. In these cases, Product Liability Insurance often complements Errors and Omissions Insurance.

Importers, Distributors, and Private-Label Sellers

Importers and private-label sellers are often treated as manufacturers under U.S. product liability law, especially when the original manufacturer is overseas. If your brand is on the product, you’re likely to be pulled into any claim.

Companies Required to Carry It by Contract or Regulation

Retailers, distributors, marketplaces, landlords, and enterprise customers often require proof of Product Liability Insurance. In some regulated industries, carrying coverage becomes a practical requirement to operate.

Learn more about how miuch Product Liability Insurance you need.

How Much Does Product Liability Insurance Cost?

There’s no fixed price for Product Liability Insurance. Cost depends on how much risk a product introduces and how widely it’s distributed.

Insurers typically evaluate:

• Product type and severity: Ingestibles, medical devices, batteries, automation, and safety-critical products tend to be priced higher.
• Industry and regulatory environment: Some industries attract more litigation and scrutiny.
• Sales volume and distribution: More units and broader geographic reach increase exposure.
• Limits and deductibles: Higher limits cost more. Higher deductibles can reduce premium.
• Claims history and quality controls: Prior claims can increase pricing. Strong documentation and safety processes can help.
• Stage of growth: Early-stage companies may pay more relative to size due to limited operating history.

How Much Product Liability Coverage Do You Need?

The right amount of coverage depends on realistic downside, not a one-size-fits-all minimum. The goal is to carry limits that can absorb a credible worst-case scenario without overbuying coverage that doesn’t match your exposure.

Common drivers include:

• Severity of harm: What happens if the product fails in the worst plausible way?
• How many people could be affected: Could a single defect impact many customers?
• Your role in the supply chain: Manufacturers, importers, and private-label sellers often need higher limits.
• Contract and partner requirements: Large customers and marketplaces often require minimum limits and additional insured status.
• Growth trajectory: As distribution expands, exposure increases and limits should be revisited.

Many businesses pair primary Product Liability Insurance with Umbrella Insurance to scale limits more efficiently.

Product Liability Claim Examples

Product claims rarely start as lawsuits. They usually start with an incident, then move to demand letters, then litigation that pulls in every business connected to the product. Common scenarios include:

Consumer Product Malfunction

A battery-powered device overheats and causes a house fire. Claims target the seller, distributor, and brand owner for property damage and bodily injury.

Hardware or IoT Device Failure

A connected device malfunctions and causes physical injury. Even if a supplier component contributed, the company that sold the product may still be named.

eCommerce and Imported Goods

A defect in an imported batch causes injuries to multiple customers. If the manufacturer has no U.S. presence, the importer and brand are often treated as the primary defendants.

Life Sciences and Health-Related Products

A medical device or consumable is alleged to have caused adverse health effects, prompting bodily injury claims and long-tail litigation.

Private-Label or Rebranded Products

A company sells a third-party product under its own brand. When it causes injury, the brand owner is treated as the manufacturer for liability purposes.

Well-structured Product Liability Insurance helps manage the operational and financial distraction these claims create, so leadership can stay focused on running and growing the business.

Product Liability Insurance vs. Other Business Insurance Policies

Product Liability Insurance covers physical injury and property damage caused by products. Other policies cover different failure modes.

Product Liability Insurance vs. General Liability Insurance

Product liability coverage is often included within General Liability Insurance under the products-completed operations section. Even when bundled, limits and exclusions matter, especially for product-driven businesses.

Product Liability Insurance vs. Errors and Omissions Insurance

Product Liability Insurance covers bodily injury and property damage. Errors and Omissions Insurance generally covers financial loss from performance failures, design mistakes, or professional errors without physical harm.

Product Liability Insurance vs. Cyber Insurance

Cyber Insurance covers breaches, ransomware, and privacy liability. Product Liability Insurance generally doesn’t respond to data loss or cyber extortion. For connected products, the same incident can trigger different policies depending on what harm occurred.

Product Liability Insurance vs. Directors and Officers Insurance

Product Liability Insurance protects the business from product harm claims. Directors and Officers Insurance protects leadership from governance and oversight claims that may follow a product incident.

Product Liability Insurance works best as part of a coordinated coverage strategy, aligned with the policies designed to address other risks.

Frequently Asked Questions

Do I need Product Liability Insurance if I don’t manufacture the product?

Yes. Importers, distributors, resellers, and private-label sellers can still be held liable, especially if the manufacturer is overseas or hard to pursue.

Is Product Liability Insurance included in General Liability Insurance?

Often, yes. It’s commonly part of a Commercial General Liability policy, but limits, exclusions, and endorsements still matter.

Does Product Liability Insurance cover product recalls?

Usually not. Recall-related costs typically require separate Product Recall coverage.

What happens if I sell products internationally?

International sales can add complexity. Territorial limits, policy terms, and local legal standards can affect how coverage responds.

When should I increase Product Liability Insurance limits?

Common triggers include higher sales volume, new products, wider distribution, entry into regulated markets, and larger customer contracts.

Is Product Liability Insurance required by law?

Usually not, but it’s often required by contract. Many retailers, marketplaces, distributors, and enterprise customers require proof of coverage.

Vouch Specialty Insurance Services, LLC (CA License #6004944) is a licensed insurance producer in states where it conducts business. A complete list of state licenses is available at vouch.us/legal/licenses. Insurance products are underwritten by various insurance carriers, not by Vouch. This material is for informational purposes only and does not create a binding contract or alter policy terms. Coverage availability, terms, and conditions vary by state and are subject to underwriting review and approval.