How much does it cost to buy a Product liability insurance policy? What are the processes involved? This article will explain in detail how to get product liability insurance.
It is every manufacturer’s dream to have a product that does well in the market; a product that people are actually buying and using because developing a product takes a lot of time and effort and when the product finally hits the market and you start to smile to the bank, you couldn’t be happier.
But there is something that can stand in the way of that happiness, something that can swallow all of that profit and leave your business bankrupt if you do not take care of it properly. That monster is known as a product liability claim.
When you manufacture a product, you will most likely do a lot of quality control and risk assessment to ensure that your products are safe for use but that is not in any way enough; because you never can tell what may happen to your customers as a result of consuming or using your products therefore, you must protect your business by obtaining a product liability insurance policy so that your business is covered whether such cases arise or not.
Now, product liability insurance is not like all the other insurance products in the market that you are already familiar with and buy even with your eyes closed; you have to take extra care when buying your product liability insurance policy especially if it’s your first time.
The steps outlined below would serve as a good guide for you on how to buy product liability insurance for your business and also help you avoid insurance buying pitfalls-:
How to Get or Buy Product Liability Insurance for your Business
1. Talk to a professional-: It may be difficult for you to single-handedly assess the risks related with the use of your products and that may lead to over-insuring or under-insuring your products therefore, it is always wise to speak with a professional who is experienced with risk assessment and insurance. Such a person would be able to give you professional advice on how to insure your business against product liability claims.
2. Get as many product liability insurance quotes as you can-: At this stage, you shouldn’t be in a rush. You should do your due diligence by getting as many quotes as you can lay your hands on and comparing each one of them. Ensure that you give relevant information to the insurance broker so that you can get the right quotes. Some of the information you may need to provide include-:
- Type of business and industry you operate in
- Where you operate your business and manufacture your products
- Where and how you sell your products? If your goods are exported, you have to state this too
- List of suppliers and subcontractors
- Any other relevant information
3. Compare quotes: When comparing quotes received for product liability insurance, do not be tempted to settle for the cheapest. The cheapest coverage might not be the best for your business. Rather, you should perform a deep assessment of each quote you received putting the following factors into consideration:
a. The Time factor-: Insurance policy coverage treats time differently. Some policies cover you on a claims-made basis while some others cover you on a time of occurrence basis. Now let me explain each basis.
An occurrence policy would cover you irrespective of when the incident occurs as long as the insurance policy is in full force. For example, if you took up product liability insurance in 1999 and terminate it in 2005, if a customer is making a claim now in 2014 for something that happened way back in 2004, the insurance company has an obligation to pay claims in spite of the fact that the insurance contract has been terminated.
The claims-made policy is slightly different in the sense that the insurance company would only cover for claims made during the coverage period. It is very essential to note this before choosing and product liability insurance policy.
b. You should also examine the quotes that you are given for gaps and overlaps. You must be able to determine if the insurance policy is sufficient to cover for all possible risks or if there are some risks not included. You should also look out for redundant insurance coverage.
c. Policy limits-: To what extent does each insurance policy cover you in the event of a product liability claim?
4. Investigate the insurance companies-: It is not enough to evaluate the quotes and select one company. Before you settle for any company; you have to properly investigate the company to be sure that you are in safe hands. You should first look into the financial strength of the insurance company.
- An insurance company that is not financially strong would always look for ways to avoid paying claims. You would want to work with a company that you can be sure would honor their obligations without putting you through stress and the first step to achieving that is by finding out how strong the company is financially.
- Next, you should look out for references and reviews from their customers. You can easily use search engines on the internet to find out or ask questions from other business owners. Too many complaining and dissatisfied customers might be an indicator that this that is not the right company you should be doing business with.
- You might also want to try out their customer service skills to see how they respond to enquiries and complains. You can do this by calling up their customer care representatives and speaking with them. The way they respond to your questions would reveal a lot about how the company handles its clients, and would also help you to gather a lot more information about the insurance policy that you are about to purchase.
After you have followed all the steps outlined above, you can now choose the most suitable product liability insurance for your business. If you have commercial General Liability Insurance for your business already, you should first check if it provides some product liability insurance coverage and the extent at which it does before going shopping for a product liability insurance policy.