Products Liability Insurance

How Much and The Cost?

How much Products Liability Insurance do I need?

The cost of premiums will depend of the type of products sold, the degree of risk, business turnover during the forthcoming year and the number of employees.

Premium Calculation

Base rates are used as the starting point for calculation and this is adjusted according to the merits of an individual case for:

• a good claims record
• evidence of a positive approach to risk
• management
• size of risk

For example if you supply: combustible items such as fireworks, flee and insect control chemicals, children's and baby toys, Chinese and overseas manufactured products, hair and skin care products, motor cars and vans, chemicals and tobacco or household cleaning products you may expect higher insurance premiums.

Similarly, if you supply a large market the risks will be greater.

The average amount of cover is between £1 million and £5 million, with most business opting for around £2 million worth of product liability insurance.

You may require a specialist broker to advise on whether £1m, £2m or £5m is an appropriate level of cover.

How can I reduce product liability claims and insurance cost?

If you are a products manufacturer, safety must be at the forefront of everything you do, from the early design stage through to marketing. Make sure that you are aware of specific regulations relating to your product, and that you comply with safety standards.

Importers have a similar responsibility to ensure product quality and safety. Customer complaints should be investigated and recorded and the products' manufacturer alerted to any problems.

Distributors should ensure that any safety information provided by the manufacturer is made available to customers.

If you are a shop owner, before signing a contract with a manufacturer or importer, ensure there is a clause confirming that the supplier will indemnify you against any claim for damages.

Take practical steps to make sure that any products you sell are safe. If you sell fireworks, for example, pay close attention to storage requirements. You would be wholly liable if you stored them in an unsafe manner resulting in injury to a third party.

If you are unsure about the safety of a particular product, contact the Trading Standards office in your local council for advice.