This sort of insurance protects a business from claims filed relating to the manufacture or sale of products, food, medicines, or other goods to the public. If there are any injuries suffered by a buyer, user, or bystander thanks to the malfunction of a company’s product; product liability insurance is designed to cover the company. Some may know this policy as operations insurance.

Claims against product liability insurance are often broken down into three basic categories. The first category of claim is one based on manufacturing or production flaws. This claim contends that a part of the production process caused an unsafe defect in the product. The next category is a claim made thanks to a design defect. This sort of claim states that a product’s design is by nature unsafe. Think the rear gas tank in the Pinto. The final claim is based on defective warnings or instructions, which claims that the product wasn’t labeled correctly. The suit based on hot McDonald’s coffee in the past is an excellent example of the final category of claims.

As for the types of damages normally seen in these sort of claims, one could be awarded medical costs, compensatory damages, attorneys’ fees, costs, and punitive damages. That said, the premiums on product liability policies are based on the type of product manufactured by the company, the volume of the company’s sales, and the role of the insured person in the manufacturing or sales process.

What type of company needs product liability insurance? Basically, any company that provides products to the public. For most companies, some sort of coverage is presented in the standard commercial general liability coverage or in the business owners’ policy. However, this isn’t always the case. If you are a small business owner, make sure that you check your policy, as you need to know what is and isn’t covered.

As with any sort of insurance, you will have to make sure the policy will give you the exact coverage you need.