Product liability insurance what it covers and what it costs

Product liability insurance is a type of business insurance that covers the legal costs and compensation your business could face if a product you design, manufacture, repair, import or supply causes injury to a person or damage to property.

The cover responds once a product has left your control, whether that's left your factory, warehouse, shop, or website, and something goes wrong once it's in someone else's hands. It typically pays out where the underlying problem is a design flaw, a manufacturing defect, or a failure to warn consumers of a known risk.

This guide is part of our wider business insurance guide, which covers every type of cover a UK business might need.

Public liability insurance and product liability insurance are often sold together, but they cover different risks. Public liability insurance covers injury or damage caused by your business's general activities or presence, for example if a customer trips over stock in your shop. Product liability insurance covers injury or damage caused specifically by a product once it has left your premises or control, for example if a faulty appliance causes a fire in a customer's home.

The two covers are usually combined into a single policy, but they remain legally and functionally distinct. It's worth checking that a policy actually covers both risks rather than assuming one automatically includes the other.

Product liability insurance is relevant to any business that touches a physical product at some point before it reaches the end user. That includes:

• Manufacturers who design and produce goods
• Importers who bring goods into the UK from overseas suppliers
• Wholesalers and distributors who supply products to other businesses
• Retailers who put their own brand on a product, even if someone else made it
• Businesses that repair or refurbish goods before reselling them
• Anyone who supplies a product but can't identify who originally manufactured it

Liability can pass down the supply chain. A retailer can be held liable for a defective product even if they didn't make it themselves, particularly if the original manufacturer can't be traced or is based overseas. If your business also transports or delivers products to customers, it's worth checking your fleet insurance for business vehicles covers goods in transit as well as the vehicles themselves. And if your products carry a wider liability risk, it's worth considering how product liability insurance sits alongside other cover such as directors' and officers' insurance, which protects individual directors personally rather than the business itself.

Product liability insurance covers three main triggers: design flaws, manufacturing defects, and a failure to warn consumers of a known risk. Where a claim is proven, cover typically pays for:

Product liability insurance has clear boundaries. Cover is typically excluded for:

• The cost of recalling a faulty product from shops, warehouses or customers
• The cost of repairing or replacing the defective product itself
• Deliberate or knowing supply of a product you already know is unsafe
• Contractual liability that goes beyond what the policy specifically covers

Product recall costs and the cost of replacing a faulty product are two of the most commonly misunderstood exclusions. If recall risk matters to your business, product recall insurance is usually available as a separate, add-on cover rather than something bundled into a standard product liability policy.

Product liability insurance isn't a legal requirement in the UK. But that doesn't mean the underlying liability is optional. Under the Consumer Protection Act 1987 and the General Product Safety Regulations 2005, businesses can be held strictly liable for damage caused by a defective product, regardless of whether they were at fault or acted carelessly.

In practice, many retailers, client contracts and online marketplaces (including Amazon) now require proof of product liability cover before they'll list your product or agree to work with you as a supplier. Even where it isn't legally compulsory, it's often a practical condition of doing business.

There's no single answer to how much product liability insurance costs. Insurers price cover based on your specific risk, and the main factors include:

• The type of product you design, make, import or sell
• Industry risk - construction products and children's goods, for example, generally carry higher risk than stationery or homeware
• Your annual turnover
• Your claims history
• The cover limit you choose, typically ranging from £1 million to £10 million or more

These figures are for illustration only. Actual premiums depend on individual underwriting, your specific product category, claims history, and the insurer you choose, so they will vary. Comparing quotes from more than one insurer is the most reliable way to understand what product liability insurance is likely to cost your business. For a broader look at pricing across different types of cover, see our business insurance costs explained guide.

There's no fixed rule for how much product liability cover you need. In practice, the right limit is usually driven by three things: what your client contracts require, what retailers or marketplaces stipulate before they'll work with you, and the potential scale of harm your product could cause if something went wrong.

A single faulty item causing an isolated injury is a very different risk to a faulty batch reaching thousands of customers, and cover limits typically reflect that range, running from £1 million up to £10 million or more for higher-risk products. An advisor can help you match your cover level to your contractual obligations and overall risk profile, rather than guessing at a number.

We compare product liability insurance across a wide range of insurers, rather than routing you toward a single provider's own policy. You can access expert advice with no pressure to proceed at any stage, and compare the best business insurance providers before deciding who to go with.

If your business is financing new equipment, stock or manufacturing capacity, our business loans guide covers the borrowing options available alongside your insurance planning. And if you employ senior staff whose loss would affect the business, our key person insurance guide explains how that cover works alongside product liability insurance.

If you'd like impartial guidance alongside broker advice, MoneyHelper (0800 138 7777) offers independent money guidance backed by the government.