Product liability

A manufacturer or a trader can fall victim to complicated and expensive law suits due to a possibility that a product could cause damage to a third party. Product Liability insurance is very important if you have a manufacturing unit.

The most at risk products are those that are generally used, touched or consumed. If you have a business which manufactures food products, toys and so on make sure to avail product liability insurance. There is also a protection against liability claimed by third party due to business or its employees' negligence.

A product liability policy covers claims, which the insured becomes legally liable to pay to third parties because of bodily injury or property damage arising out of the use or consumption of products manufactured, sold and /or distributed by the policy holder.

As a manufacturer supplying products, is always susceptible to the possibility that your product could cause damage to a third party – either property or a person. A small defect could open you up to massive claims.

Key Features

The amount of coverage your business needs depends on:

  • Perceived risk from a product: Coverage depends on the amount of risk associated with your product, and then consider how much product liability insurance is necessary. Perilwise has experts that will help you in assessing risk, contact us to get an assessment.
  • Jurisdiction/Country of exports: If you export to countries across borders with a history of awarding high damage amounts to plaintiffs, you will typically need to have product Liability insurance with higher coverage limits.

Pricing of a product liability policy depends on:

  • the type of product you deal with
  • total turnover,
  • countries you export to,
  • coverage limits,
  • policy extensions, and
  • deductibles.

Insurance costs can also be reduced by mitigating your risks or by instituting certain quality control procedures at your company. Identifying, eliminating and mitigating the risks can help protect you against future losses and can also lower your premiums.

In many countries product liability is a statutory requirement.

It is also possible to customise coverage for your needs by combining multiple liability covers; such as a product liability and errors & omissions, or commercial general liability and product liability

Perilwise will help you manage all your risks and customise a cover for you, ensuring all aspects of your liability risks are addressed.


A Product Liability policy covers all sums (including defence costs) which the insured becomes legally liable to pay as damages because of:

  • Accidental death/bodily injury or disease to any third party
  • Accidental damage to property belonging to a third party

Arising out of any defect in the product manufactured by the insured and specifically mentioned in the policy, after such product has left your premises.

Coverage is written on a claims-made basis, meaning a Product Liability policy provides coverage for an injury or loss if the claim is first reported or filed during the policy period.

However, a product liability policy offers the benefit of retroactive date, i.e. a date stipulated in a claims-made Liability policy declarations section as the first date of incidents covered by the policy. The retroactive date is designed to provide coverage for claims resulting from incidents that take place prior to the current policy term.

Renewal claims-made policies usually have the retroactive date of the first policy issued to the insured. When this is not done, there is a gap in coverage.


  • Vendor’s Liability Extension: Covers Liability arising out of sale and distribution of named insured products by vendors with original warranties and instructions of use of the product specified by the manufacturers.
  • Global extension: Policy can be extended to cover Liability arising out of judgements or settlements made in countries anywhere in the world.
  • Cover for exports when domestic turnover is also covered.
  • Technical Collaborators Liability Extension
  • Coverage for defense cost incurred with prior consent
  • Benefit of Retroactive Date

Key Exclusions

  • Product Recall:A product liability policy will generally not cover the cost of removing replacing or repairing defective products or loss of use thereof.
  • Deliberate, wilful or intentional non-compliance of any statutory provision.
  • Any Claim arising out of pure financial loss
  • Any claim arising out of fines, penalties, punitive and/or exemplary damages
  • Contractual Liability:If you agree to pay penalties in a valid contract, then claims arising because of said specific contract are excluded.

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