The Importance of Product Liability Insurance for Manufacturers

Written By Charlotte Insurance on February 26, 2024. It has 0 comments.

the owner of a manufacturing facility thinking about the importance of Product Liability Insurance for Manufacturers

Manufacturing companies have a lot to balance on a daily basis. They need to find customers for their products, source the raw materials for those products, and have their employees create and package them. The last thing that the CEO or owner needs to worry about is what happens when the products leave the factory and end up in the hands of customers and consumers. However, problems with manufactured products are a very big issue, one that thankfully can be mitigated with insurance.

What is Product Liability Insurance?

Product liability insurance is designed to protect manufacturers from having to pay hefty fines should something go wrong with their products. For example, if you make stuffed toys and something goes wrong with your stitching machine, kids may end up with toys that will quickly fall apart. Your company will have to issue a recall, which could wind up costing quite a bit of money.

There are other issues with more consequences that can arise with products as well, such as selling canned soup that didn’t get processed correctly. As a result, consumers could end up with botulism. This could end up in some expensive lawsuits. Thankfully, you may not have to pay out of pocket if you have the right product liability insurance policy.

What Does this Insurance Cover?

A typical product liability insurance policy covers a number of different, yet related, issues that can come up after the manufacturing process is complete. For example, it may cover:

  • The Costs of a Recall – It can be expensive to recall products. Not only do you need to spread the word about the recall as soon as possible, but signs will have to go up in stores and your business will need to pay to have the faulty products sent back to you.
  • The Costs of Replacement Products – Once the damaged products are off the shelves, you’ll need to replace them with new ones. This can also be expensive, since you’ll have to procure more raw material, make the products, and then ship them out.
  • Any Fees Required by the Sellers (Your Customers) – Your customer contracts, for example, those with a big chain store, may state that you have to pay them a specific amount of money as a fee in case of a recall.
  • The Price of Disrupting Your Business – Obviously, it will be a while until your business recovers from the recall. Thankfully, your insurance can help keep you afloat while your machines and processes are checked and more.
  • The Price of a Public Relations Professional – Your company’s professional reputation can end up trending downwards if something goes wrong with your products. You’ll need an ad campaign, some good press releases, and more in order to repair it, which is where the price of a PR professional comes into play.

Have Questions? Contact Charlotte Insurance

Want to learn more about the importance of product liability insurance for manufacturers? Contact Charlotte Insurance. Our agents can explore and explain all available options and put together the insurance coverage plan your business needs.

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