12-05-2017

In a recent article Insurance Business Mag reported that the number of food and drink recalls across the UK grew by 50% last year, from 56 to 84. One of the biggest was when confectionary company Mars recalled its bars from 55 countries (including the UK) when plastic was found in a Snickers bar in Germany.

Of course, in the food and drink industry recall costs could total to millions, but imagine how much higher these could be with high-value products such as technology or cars. Either way, product recalls can be pricey and cripple a business in some cases, so how do you cover the costs?

Prepare for Recalls with Product Liability Insurance

Product liability insurance is a voluntary policy that protects a business should a product cause damage to a third party - a person or property. This covers the design, manufacturing and supplying of any physical product that is sold or given away for free.

This is not an insurance policy required by law, however it could be extremely beneficial should an instance occur where damage is done and you need to recall items. Consider the Mars case study, could you afford to fork out millions because of a small mistake?

Besides covering the cost of recalling items, you may decide to cover your business should you get sued for the damage occurred by your product as, if found liable, you may be required to pay hefty damages to the claimant.

Even if you didn't manufacture the product, you may be seen as liable if:

• Your business name is on the product
• Your business repaired, refurbished or made changes to the product
• You imported it from outside the EU
• The manufacturer cannot be identified or is no longer trading

However, if you can prove the products were faulty when they were supplied to you, you warned customers about misuse and your quality controls were of excellent standard, your policy should cover any consequent expenses.

How Much Does Product Liability Insurance Cost?

Product liability insurance typically starts with a cover limit of £1million and can reach up to £10million if required. It can start from as low as £5 a month, but fees will vary depending on the circumstances of each individual policy.

Please note: Product liability insurance may not cover you if faults are proven to have occurred due to poor workmanship.

If the idea of another monthly outgoing scares you, then implementing quality control measures could help see your premium decrease. Alternatively, build a custom policy and compare business insurance deals online to ensure you take out a policy that covers everything you need for a competitive price.