Being an entrepreneur who creates products for customers means juggling many priorities at once—quality assurance, customer service, logistics, and so much more. With all of that going on, another problem you need to be aware of is the risk of getting sued. But not to worry! Product liability insurance can save the day.

Believe it or not, there’s a chance that your customers could file a lawsuit against you if your product causes damage or harm in some way. And if you’re not prepared to address the claim, it could severely impact your business.

Product liability insurance, which is part of your general liability insurance coverage, protects you from the financial consequences resulting from claims due to an injury or damage caused by your product.1 If you’re not sure how this coverage can help you, this guide will teach you the basics.

What does product liability cover?

If you’re making and selling crafts, product liability insurance is essential for you to create cool products without worrying about financial losses that happen in the event of a lawsuit.

Product liability is part of “products and completed operations insurance,” which can protect contractors and others who perform jobs or work. It safeguards against financial consequences due to legal liability arising from injury or damage after their job is completed.

Though other providers may sometimes exclude this coverage from their general liability insurance policies, Thimble’s policies include product liability for many of its classes of insureds. It is included in our manufacturer coverage on monthly and annual policies for creatives such as:

Types of damage covered by product liability

Of course, you’re making the effort to put out the best craft you can. But once a product leaves your care, there are lots of things that can go wrong, and you want to be prepared. According to Cornell Law’s Legal Information Institute, product liability refers to risk exposure stemming from:2

  • Manufacturing and production defects
  • Design flaws
  • Inadequate warnings or instructions
  • Damages or injuries stemming from product malfunctions during normal use after the product was sold or a project was completed

Furthermore, it can protect against the financial consequences from claims for injury or damage that are based on strict liability, meaning the claimant has proven that:

  • Your product injured the claimant
  • Your product had a dangerous defect
  • The injury occurred when the claimant used the product correctly
  • No substantial changes happened to the product after leaving the seller.

If, for example, your handmade soap causes a health issue for one of your customers and it sends them to the hospital, you could be held liable if they decide to sue you. In this situation, Thimble’s Soap Makers Insurance could provide the investigation of the claim, your defense in court, and then cover the settlement or judgment costs.

What are the criteria for product liability claims?

For your product liability insurance to cover a claim, a few factors must be at play:

  • The claim needs to allege bodily injury or property damage
  • Your products caused damage or injury
  • The damage occurred away from your place of business and while the product was in the customer’s possession

On the other hand, your product liability insurance won’t cover every bad incident that happens after you’ve finished making your products. Your insurance likely won’t pay for:

  • Products that are damaged after your work is done
  • Recall of products
  • Claims involving injured workers.

Let’s say you use a product to make jewelry, but you find out later that the product is recalled because it contains a toxic chemical. The recall of those products from your customers likely wouldn’t fall under your product liability coverage.3

What are the product liability coverage limits?

If your creations cause a problem for your customer and you face a lawsuit, you’ll need to know how much your product liability insurance covers.

Product liability insurance has a coverage per occurrence coverage limit and its own aggregate limit. The product liability aggregate limit refers to the most an insurance company will pay for all product liability losses during the policy period. The per occurrence limit refers to the most the insurer will pay for all damages for bodily injuries and property damage in a single event.4

At Thimble, the per occurrence limit for product liability insurance is the same as the per occurrence limit for the rest of the general liability coverage, usually up to $1 million. The general aggregate limit (not including products-completed operations) is $1 million and the products-completed operations aggregate limit is $1 million. With Thimble, customers have the option of choosing to increase the limit to $2 million for both coverage and aggregate limits.

Get product liability insurance with Thimble

Losing a product liability lawsuit can be quite expensive. In 2018, the average personal injury award in product liability claims was more than $7.8 million, per the Insurance Information Institute.5 So you don’t want to risk your long-term business success by waiting too long to get the right coverage and getting hit with a costly judgment.

Need help finding a policy? Thimble can help you get a monthly or annual general liability policy with product liability coverage that suits your needs and budget.

To get started, download the Thimble mobile app or click “Get a Quote,” answer a few questions, and you’ll get a quote immediately. Then you can pick the policy of your choice. Click to purchase, and you can be insured in 60 seconds; a no-brainer compared to the countless hours you took to make your goods.

Get covered, then get crafty

The faster you get the right coverage for your crafting business, the sooner you can focus on what matters—making your customers happy with your gorgeous creations. Remember:

Your product liability insurance will cover damages and injuries outside of your workplace. The bodily injury or property damage must occur away from your place of business, while the product is in the customer’s possessions. Your premium will vary based on your sales and crafts.

Once you find and purchase the right coverage, you’ll receive your policy and Certificate of Insurance right away, so you can get moving. And if something goes awry with your handmade products, you can take care of any claims that emerge, so you can do what you love.

Sources:

  1. International Risk Management Institute. Product Liability Insurance.
  2. Cornell Law School Legal Information Institute. Products liability.
  3. CBS News. Costume jewelry found to have high levels of toxins and carcinogens, tests show.
  4. International Risk Management Institute. How the Limits Apply in the CGL Policy.
  5. Insurance Information Institute. Facts + Statistics: Product liability.

Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.