{"id":282904,"date":"2024-09-12T14:16:19","date_gmt":"2024-09-12T02:16:19","guid":{"rendered":"https:\/\/www.reckon.com\/au\/?post_type=sbh&p=282904"},"modified":"2026-02-20T14:25:21","modified_gmt":"2026-02-20T02:25:21","slug":"product-liability-insurance","status":"publish","type":"sbh","link":"https:\/\/www.reckon.com\/au\/small-business-resources\/insurance\/product-liability-insurance\/","title":{"rendered":"Product Liability Insurance Explained"},"content":{"rendered":"

[et_pb_section fb_built=”1″ custom_padding_last_edited=”on|phone” _builder_version=”4.27.0″ custom_padding_tablet=”” custom_padding_phone=”0px||||false|false” da_disable_devices=”off|off|off” locked=”off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.23″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_padding=”||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Copy paste body text here” _builder_version=”4.27.5″ header_2_font_size=”32px” hover_enabled=”0″ header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

If you run a small business that manufactures, sells, or supplies goods in Australia, then you\u2019ll need to think about getting product liability insurance. It\u2019s a specific type of business insurance that will protect your operations from financial losses if a product you provide causes personal injury or property damage.<\/p>\n

Given the complexities and risks involved with creating and distributing products as part of your business activities, having product liability insurance is a way to protect your business \u2014 and yourself \u2014 from the financial fallout and legal liability of any future claims, whether the fault lies with the design, manufacturing, or even the use of the product.<\/p>\n

Here\u2019s everything you need to know about how product liability insurance works and what it covers as part of your overall business insurance policy and broader insurance strategy.<\/p>\n

What is product liability insurance?<\/h2>\n

So, what is product liability insurance? This particular type of business insurance<\/a> is a way to make sure you\u2019re financially protected from the legal costs and compensation tied to claims of injury or property damage due to a product you make, sell, or supply.<\/p>\n

In Australia, businesses can be liable if their product causes personal injury or property damage, even if the fault isn\u2019t theirs. That means that if a product is poorly designed, improperly labelled, or contains a defect that causes harm to a customer or client, your business could be responsible for the fallout (i.e., damages).<\/p>\n

If you have a product liability claim, your insurance may cover the legal fees, settlements, and compensation costs related to the defective or unsafe product.<\/p>\n

Claims arising from these issues can be complex and expensive, especially when multiple parties make up the manufacturing or distribution chain. Your liability policy will apply to tangible products (e.g. consumer goods) and industrial equipment or machinery that might cause harm because of defects.<\/p>\n

In many industries, having both public and products liability insurance is considered a standard part of doing business. Retailers, manufacturers, suppliers \u2014 everyone is susceptible to product-related claims, whether you produce the items yourself or source them from other vendors.<\/p>\n

Without product liability insurance, you run the risk of being hit with huge financial claims that could result in bankruptcy or long-term reputational damage. Like another type of policy \u2013 public liability insurance \u2014 it\u2019s a key part of risk management for businesses that engage with the public.<\/p>\n

How does product liability insurance work?<\/h2>\n

Whereas public liability insurance covers<\/a> you against negligence that causes injury or damage, such as on your business premises, products liability insurance covers you financially when a claim arises because of defects or issues with the products your business manufactures or supplies.<\/p>\n

If a product you\u2019re associated with causes harm to a customer, product liability insurance will cover the legal costs and any settlements or compensation required by the claimant. In other words, your business can handle these issues without becoming financially crippled by legal fees and payouts.<\/p>\n

The cover extends to everything from manufacturing defects to design flaws and inadequate warnings that contribute to improper use. Say you manufacture children\u2019s toys. If one is found to have a choking hazard thanks to a faulty design, you (the manufacturer), the supplier, and the retailer could all be implicated in a product liability claim.<\/p>\n

Even if your business isn\u2019t directly involved in the creation of the product, you could still be held responsible, so it\u2019s definitely worth considering the inherent value of having product liability insurance.
What does product liability insurance cover?<\/p>\n

Here are a few different scenarios where having product liability insurance could be helpful if a product is sold, supplied or manufactured by your business and causes harm or damage:<\/p>\n