Home – New Forums Starting your journey Do I really need product insurance

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  • #988030
    kel85
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    I keep reading about product insurance.

    Do i still need insurance if i am getting my products from Australian suppliers. If a teething necklace was to break for example and a baby chocked and died. (hope this never happens to anyone) would that be my fault if i sold it to them or would it be the fault of the company who makes the product. this might be a stupid question but do i need insurance?

    Thanks heaps.

    #1165337
    alliedib
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    Hi Kel,

    Great question – you certainly want to know exactly what you are and aren’t responsible for before (heaven forbid) something goes wrong…. I have been working on a liability policy for a number of children’s clothing retailers recently and this question gets asked a lot – you are not alone!

    Simple Answer – YES you should have Product Liability insurance if you are a retailer.

    Extended Answer (and sorry if it falls into the TLDR category lol) – Although you are purchasing from Australian suppliers, you may be included in a lawsuit if someone suffers an injury due to your product – this is because, as the retailer, you are the entity which provides the product to the customer.
    The lawsuit will then name additional defendants, including:
    – wholesalers (if known); and
    – manufacturers and/or importers (if known).
    Solicitors will then work out who is the party responsible for causing the damage and the compensation will be apportioned against them. Even if you were not responsible, the cost in engaging solicitors to defend a claim against you would be considerable (and you would not necessarily be able to recover these costs against the responsible party).

    In the insurance world, different insurers have different definitions when it comes to ‘Products’. Usually, however, they are generally something similar to the following (this is from an insurers Policy Wording):
    ‘Products means: any thing (after it has passed from Your possession and control), including its packaging, that was
    – manufactured;
    – grown;
    – extracted;
    – produced;
    – processed;
    – assembled;
    – constructed;
    – erected;
    – installed;
    – repaired;
    – serviced;
    – treated;
    – sold;
    – supplied;
    – re-supplied; or
    – distributed
    by You in the course of Your Business.’
    As you can see there is a number of instances where something could be considered your Product. Its important to ensure that you have cover if you need it.

    There are two types of policies in the insurance market for micro/SME businesses:
    – Public Liability. This generally excludes any cover for your Products.
    This type of cover is usually provided by direct insurers where someone is looking to satisfy a 3rd party eg. to obtain a space at a market. The market organisers are not interested in your Products – they are only interested that you have cover in case someone is injured due to your stall. These are usually very cheap but may not give you the cover you require.
    – Business Liability. This may also be called Combined Liability / General Liability / Public and Products Liability. It will usually include cover for Public Liability, as well as Products Liability (subject to the terms and conditions of the policy).

    So which one do you choose? That’s a personal opinion – generally speaking people that are comfortable that they have absolutely NO product exposure only take Public Liability. However, if you have even a slightest product exposure then a Public Liability only policy would generally not be suitable. From memory I cannot remember when I last recommended a Public Liability only policy.

    Realistically though, most business insurers offer Public and Products Liability as a combined cover and the premium charged for Products Liability reflects the exposure – as a retailer it may not be that high so the premium may reflect this.
    You may find a business insurers policy slightly more expensive than a market stall policy (and we are generally only talking a few hundred $$, not thousands), but the extra cover is usually well worth it (and the premiums may be tax deductible) – and as mentioned before, if you have a policy that indemnifies (covers) you, it will pay the costs not only for compensation, but also the costs in defending a claim brought against you (which could be higher than the actual compensation itself)…

    Now all the above is only general information and not advice – if you need to know anything specific to your circumstances please give me a call. Otherwise, let me know if you need any of the above clarified.

    Regards,

    Mark

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