Cleverly manage product risks.
Discover how nextsure's product liability insurance protects your business from the financial consequences of defective products and provides security in your day-to-day operations.
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What is product liability insurance?
Definition and Purpose
Covered Risks
Legal Basis (ProdHaftG)
Necessity for Companies
Who needs product liability insurance?
A product liability insurance is not only recommended but often essential for a wide range of businesses. First and foremost are **manufacturers**, who design and produce products. They bear the primary responsibility for the safety of their products. Likewise, **importers** who bring products from outside the EU into the European Economic Area are often legally treated as manufacturers and therefore, mandatorily require this protection. So-called **quasi-manufacturers**, who distribute products from third parties under their own name or brand, are also subject to this liability responsibility. Finally, **retailers** can also be held liable for product liability, particularly if the actual manufacturer cannot be identified, is based outside the EU, or is insolvent. In short: Any company that develops, produces, imports, or places products on the market should safeguard against the risk of product liability with appropriate insurance to protect itself against potentially ruinous compensation claims.
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Overview of Product Liability Insurance Benefits
Personal injuries
Protection against injuries or health damage to third parties.
Property damage
Protection against damage or destruction of third-party property.
Property damage
Coverage for financial disadvantages resulting from personal or property damage.
Worldwide Protection
Optional expansion for global markets and export activities.
Recall costs
Optional coverage of costs for necessary product recalls.
Inspection & sorting costs
Co-insurance for the cost of inspection in case of suspected defects.
Installation costs
Coverage for the removal and installation costs of defective products.
Digital Service
Quick and straightforward online claims reporting and contract management.
Expert Consultation
Expert support with tariff selection and in the event of a claim.
Tailored protection for your products and your business, digital and competent.
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What damages does product liability cover?
Product liability insurance provides financial protection when defective products cause harm to third parties. Essentially, it covers three main types of damage: **personal injury**, which includes injuries, health damage, or death of individuals. Secondly, **property damage**, meaning the damage or destruction of items owned by third parties. It is important to note that damage to the defective product itself is usually not covered. Thirdly, **resulting financial losses** are insured – these are financial disadvantages that arise as a direct consequence of an insured personal or property damage, such as loss of earnings or production downtime for the harmed party. Pure financial losses not related to personal or property damage are typically covered by a separate financial loss liability insurance. The specific coverage details and exclusions can be found in the respective insurance terms and conditions.
Typical examples of damages from practice
To illustrate the necessity of product liability insurance, here are some practical examples of damages: A **manufacturer of children's toys** launches a doll on the market, with a small eye that can become detached. A child swallows this part and suffers from choking fits followed by health issues – a clear case for product liability. Another example: An **importer of household appliances** sells a toaster with a manufacturing defect that leads to overheating and a kitchen fire. Here, the insurance covers the resulting property damage to the customer's kitchen. Or consider a **food producer**, whose products cause gastrointestinal illnesses in numerous consumers due to contamination. In addition to personal injuries, recall costs may also arise, which may also be covered depending on the policy. These examples show how quickly a faulty product can cause enormous costs.
Product Liability vs. Business Liability Insurance: The Differences
Although both product liability insurance and business liability insurance protect companies against third-party liability claims, they cover different risk areas. The **business liability insurance** provides coverage for damages that occur in the course of business activities on company premises or during external work (e.g., assembly). Examples include a customer slipping in the sales area or an employee causing damage during a client visit. The **product liability insurance**, on the other hand, is specifically designed for damages resulting from defective products *after* they have left the company and are used by the end consumer. This pertains to the consequences of design, manufacturing, or instruction errors in the product itself. Many companies require both insurances for comprehensive protection. nextsure analyses your individual needs and ensures that no coverage gaps occur.
Costs of Product Liability Insurance: Influencing Factors
The premium for product liability insurance is determined by various factors that reflect a company's individual risk. A key aspect is the **type of products manufactured or distributed** and the associated potential hazards – products for the aerospace industry carry higher risks than office supplies. The **industry** also plays a role. Other important influencing factors include the company's **annual turnover**, as this often serves as an indicator for exposure risk, as well as the chosen **coverage amount**. Naturally, higher coverage amounts lead to higher premiums. The **geographical distribution area** is also relevant; in particular, exports to high-risk markets like the USA or Canada can increase costs. Finally, the company's **claims history** and the agreed **deductible** can also affect the premium. A transparent risk assessment by nextsure helps you determine a fair and adequate premium.
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Choosing the Right Coverage Amount: What to Consider?
The choice of the appropriate level of cover is a crucial aspect when taking out a product liability insurance policy. A sum that is too low can be life-threatening in the event of a claim, while one that is too high leads to unnecessary costs. First, you should consider potential **worst-case scenarios**: What maximum damage could your products cause, especially regarding personal injury or serial damage? Also, consider **industry standards** and possible **contractual requirements** from major clients or trading partners, who often stipulate minimum coverage amounts. If you export products to countries with high compensation claims, such as the USA, this must be taken into account in the level of cover. nextsure generally recommends lump-sum cover amounts of at least 3 to 5 million euros for personal injury and property damage, with more for higher risks or export activity. Our experts support you in analyzing your individual needs to find the optimal balance between security and cost-effectiveness.
International Product Liability: What applies to exports?
The export of products presents specific challenges in terms of product liability, as different legal systems and liability standards apply worldwide. In particular, the **US and Canadian markets** are known for their stringent product liability legislation and high compensation claims (key terms: "Strict Liability," "Punitive Damages"). A standard product liability insurance policy often offers no or only insufficient protection for these regions. Companies exporting to such markets therefore necessarily require a **special foreign liability coverage or an extension of their existing policy** that explicitly covers damages in these countries. It is essential to be informed about the respective legal requirements, standards, and certification requirements in the target country before exporting. nextsure offers tailored solutions for export-oriented companies to ensure worldwide insurance coverage and cover the specific risks of international trade.
Product Safety and Risk Management: Prevention is Key
While product liability insurance is essential to mitigate the financial consequences of damages, true protection begins with prevention. Comprehensive **product safety and risk management** is the key to minimizing liability risks. This includes meticulous design and development, stringent **quality controls** during production, the use of high-quality materials, clear and understandable operating instructions, as well as unambiguous warning notices. Compliance with relevant **norms and standards** (e.g., DIN, ISO, CE marking) is as fundamental as complete documentation of all processes and effective batch traceability. Companies that actively invest in product safety not only reduce the likelihood of incidents but often also benefit from more favorable insurance conditions. nextsure regards good risk management as an important complement to insurance coverage.
What is the difference between product liability and public liability insurance?
nextsure is your digital partner for specialised insurance solutions. Our product liability insurance is designed to offer you comprehensive protection with maximum flexibility and transparency. Benefit from **tailored rates** that are precisely matched to your company profile and specific product risks. Thanks to our **fully digitised processes**, you can easily calculate your individual quote online, submit the application conveniently online, and manage your contracts at any time online. Despite the digital approach, our team of **expert insurance professionals** is available to advise you in case of questions or claims. We combine the efficiency of a digital platform with the expertise of traditional consulting. Discover now the advantages of product liability insurance with nextsure and optimally secure your business. Request your personal quote easily!
