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When Do You Need Product Liability Insurance in the UK?

Written by, Marija Petkova

Updated September, 7, 2022

Product liability is essential cover for businesses that manufacture and sell products.

But when do you need product liability insurance in the UK?

In this blog post, we’ll explain what type of businesses need insurance product liability, how it differs from general liability, and what it comes to help you make an informed decision for your business. 

What Is Products Liability Insurance?

Product liability insurance is a type of insurance that protects businesses against injury or damage claims caused by products they manufacture, sell, or distribute. 

This type of insurance helps businesses cover the costs of legal defence and settlements, compensatory costs, and any other costs associated with the case.

Product Liability Insurance vs General Liability

There is a slight difference between public and product liability insurance. 

Public liability insurance covers work-related injuries or property damage claims, including personal advertising injuries, i.e. slander and slips and falls. 

Product liability is more specific. It covers injuries or damage claims caused by any goods you sell, offer, or produce.  

So, if you’re a business that manufactures and sells products, you need product liability insurance in addition to general liability coverage. If you don’t offer or manufacture any products, then you likely need general liability insurance only.

Note: If you are a sole proprietor, you might also need public liability insurance for self-employed individuals, in addition to product liability insurance and other types of coverage. 

Do I Need Product Liability Insurance in the UK?

Product liability insurance is not a legal requirement in the UK, but it is strongly recommended for any business that manufactures, sells, or distributes products. If you do not have this type of coverage and you face an injury or a damage claim, you could be liable for hefty compensation payouts and legal fees.

Even if a business has strict quality control measures in place, there is always the possibility that a defective product could slip through, which can result in a costly lawsuit. 

Product liabilities insurance can help businesses protect themselves against these kinds of risks.

The important thing to remember is that your business may be liable for products even if you don’t manufacture them

You might be responsible for compensation if any of the things below apply:

  • You imported the product from outside of the European Union
  • You could not identify the maker of the product

What Kind of Businesses Need Product Liability Insurance?

All retailers, distributors, and manufacturers should have product liability insurance.

This type of insurance is essential for:

  • Businesses that offer a product under their brand name
  • Companies that restore or repurpose products
  • Businesses that manufacture a product
  • Any company that imports items from outside the European Union for sale in the UK

If your business doesn’t deal with this type of work, then you may not need product liability insurance. For example, a training and consultancy firm that offers B2B services doesn’t need product liability insurance.

Do you need product liability insurance if you sell products online?

Depending on where you market your products, some online retailers might require you to take out product liability coverage. 

For instance, if you are thinking about selling on Amazon UK, be aware that once you pass a certain threshold, the site will require you to purchase a product liability insurance policy. More specifically, if your sales are fulfilled by Amazon, and you have made more than £4,000 per month for three consecutive months, then you are obligated by the company to buy product liability insurance. 

What Does Product Liability Insurance Cover?

Product liability insurance can help you pay for any legal fees or compensation if someone gets injured by a product you sold, manufactured, or delivered. 

If you don’t manufacture the products, your product liability insurance can cover costs:

  • If the items were defective when they were delivered to you
  • If you provided clients with appropriate safety information and misuse warnings
  • If you specified terms for returning damaged products to the manufacturers
  • If your agreement with the suppliers covers product safety, quality control, and returns.

If you’re not sure whether or not this applies to you, check with your insurer to see exactly what’s covered under your policy or consult a product liability insurance broker to find a good policy for your business.

Things to Consider When Buying Product Liability Insurance

The type of injuries and damages that your policy will cover and the cost of the premiums for it depend on a variety of factors. 

Here’s what you should know to make sure you get the most out of your product liability insurance:

  • The type of product you manufacture or sell: Certain products come with larger inherent liability risks than others. For example, products that are used near the body or that are ingested are typically considered to be riskier than other types of products.
  • The size of your business: Small businesses typically have a harder time shouldering the costs associated with a product liability claim than larger businesses. What’s more, product insurance for a small business is cheaper.
  • The jurisdictional rules associated with product liability: These rules can vary from country to country, and even from state to state. It’s important to be aware of the rules that apply in your jurisdiction so that you can make sure you’re adequately covered.
  • The limits of your coverage: Most product liability insurance policies have limits on the amount of coverage they provide. It’s important to make sure that the limits of your policy are adequate for your needs.
  • Your business’s financial situation: If your business is not in a strong financial position, you may want to reconsider buying product liability insurance.

Did you know? Over a third of small business respondents said that financing their business was their biggest challenge!

How Much Product Liability Cover Do I Need in the UK?

That depends on your businesses’ financial situation, size, and the extent of damage or injury that your product could potentially cause. Most insurance companies provide product liability insurance with coverage ranging from £1 million to £5 million. 

Bottom Line

So, when do you need product liability insurance in the UK? The answer is as soon as you start selling products to consumers. This type of insurance will protect your business if a consumer is injured by a product you manufactured, sold, or distributed and can potentially prevent the company from going under.

Frequently Asked Questions And Their Answers

Why do you need product liability?

Product liability law exists to protect consumers from defective products. If a defect in a product causes any type of harm to a consumer, they can sue the business for damages, regardless of whether they were negligent or not.

When should you purchase liability insurance?

The best time to purchase liability insurance is when your business is young and has few assets. As your business grows and you accumulate more assets, the cost of insurance will rise accordingly. 

When do you need product liability insurance in the UK?

Product liability insurance is crucial for any business that manufactures, sells, or distributes products. It helps cover legal and other costs stemming from claims of injury and damage caused by a faulty product.

My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.