What is general and products liability insurance?
General Liability Insurance protects against lawsuits from customers who get hurt while using your product. Products Liability Insurance covers the cost of repairing or replacing defective products.
In order to protect yourself from lawsuits, you must buy both types of insurance. However, most businesses only buy one type of insurance. This leaves themselves open to lawsuits and financial ruin.
If you want to learn how to protect yourself from lawsuits and save thousands of dollars each year, then read on!
I'll explain exactly what these two types of insurance cover, why you should buy them, and how to find the best price.
Product Liability Insurance protects businesses against lawsuits over defective products sold by a company
General Liability Insurance covers legal claims made by people who suffer injuries at work
They both offer protection against financial loss due to accidents and errors
But there's one thing missing...
Product Liability Insurance also offers protection against lawsuits brought against companies selling faulty products
Why would you buy two types of insurance when you could just buy one type that provides coverage for both?
The answer is simple...
Businesses don't always know which risks they face.
For example, a company may sell hundreds of thousands of widgets a day.
But some of those widgets might break during shipping causing an injury to someone.
In that situation, the person injured has no recourse under General Liability Insurance since the claim didn't happen at work.
However, if the same company sells the broken widget to another customer, the second customer can sue the first company for damages caused by the defect.
Even though the accident happened outside of work, the lawsuit is still covered by Product Liability Insurance.
Now, imagine a scenario where a company makes a mistake while building a factory and a worker gets hurt.
Under General Liability Insurance, the company would likely not pay for medical bills or lost wages.
However, if they had purchased Product Liability Insurance, the injured worker could file a lawsuit against the company.
Since the accident occurred inside the workplace, the lawsuit falls within the scope of Product Liability Insurance.
So, why should you care?
Well, if you're a small business owner, chances are you've never considered buying Product Liability Insurance. But if you haven't, it's important to understand the benefits of having this kind of insurance.
First, let me tell you that you probably already carry General Liability Insurance.
According to the National Association of Mutual Insurers, 97 percent of U.S. employers provide workers' compensation coverage to employees.
Most employers also purchase General Liability Insurance to protect themselves against lawsuits filed by customers or third parties.
However, many small businesses don't realize that they must also consider purchasing Product Liability Insurance. This policy protects companies against lawsuits related to defective products they sell.
When you combine General Liability Insurance and Product Liability Insurance, you gain additional protection.
For example, suppose you run a restaurant and serve food contaminated with E. coli bacteria.
Someone becomes ill after eating your food and files a lawsuit claiming he contracted E. coli.
Your General Liability Insurance covers you for the costs associated with defending the lawsuit. However, it doesn't cover the cost of settling the lawsuit.
On the other hand, if you had purchased Product Liability Coverage, you'd receive reimbursement for the settlement amount.
As a result, you wouldn't incur any financial risk. And that means you can invest your money elsewhere.
Another benefit of combining General Liability Insurance and Products Liability Insurance is that you avoid paying duplicate premiums.
Let's say you bought General Liability Insurance through your employer and you also purchased Product Liability Insurance through a separate provider.
If you were to cancel your General Liability Insurance, you'd lose coverage for the entire year. That means you'd have to pay double the premium to maintain the same level of protection.
Finally, if you choose to go without either type of insurance, you could be exposed to significant liabilities.
For example, if you operate a manufacturing plant that produces defective parts, you could be held liable for the harm caused by the defects.
Product Liability Insurance helps protect you from lawsuits alleging that your products harmed others.
Remember, if you fail to obtain this coverage, you could be sued for damages resulting from a defective product you manufactured or distributed.
By adding Product Liability Insurance to your existing General Liability Insurance, your business gains additional protection.
Take a look at the chart below. It shows the difference between the total annual premium for General Liability Insurance alone versus the combined premium for General Liability plus Product Liability Insurance. The higher line represents the combined Annual Premium.
To see how this works, we'll use the following hypothetical example.
Suppose you run a manufacturing facility that manufactures widgets. You decide to expand your operation and add a new production line.
Unfortunately, you make a mistake while assembling the machines. A worker is injured and sues you for $50,000.
If you had only General Liability Insurance, this lawsuit would fall outside the scope of your coverage.
However, if you added Product Liability Insurance, this suit would be covered.
And remember, this isn't just theoretical. According to the American Bar Association, approximately 1 million lawsuits are filed every year against manufacturers.
These suits typically involve personal injury claims stemming from defective products.
Adding Product Liability Insurance to General Liability Insurance will give you the best chance of protecting yourself from such lawsuits.
With that said, let's talk about the differences between General Liability Insurance and Personal Injury Protection (PIP).
Personal Injury Protection pays for medical expenses and lost income up to certain limits. If you're involved in a car crash, PIP will reimburse you for medical bills and lost wages.
However in order to qualify for PIP, you must be enrolled as an insured driver.
You can find out whether you're eligible for PIP by contacting your current insurance carrier.
Also keep in mind that most states require you to maintain minimum amounts of insurance coverage.
Some states mandate that you carry $10,000 worth of uninsured motorist coverage. Others require that you carry $25,000 per person/$50,000 per occurrence.
Regardless of the state you live in, you should check your policy to determine your required minimum coverage.
If you don't meet the requirements, you could be subject to fines.
Additionally, if you're self-employed, you may want to consider obtaining commercial auto insurance.
Commercial auto insurance is designed specifically to help protect your business. For instance, it includes special provisions to handle different kinds of vehicles used in your business.
It also includes endorsements to address specific issues like employee leasing programs.
Finally, it often comes with extended warranties. These warranties are designed to repair or replace your vehicle if something goes wrong.
So, now that you know more about General Liability Insurance and PIP, it's time