Product liability insurance

A practical guide to protecting your products and your business

Product liability insurance helps cover the cost of claims if a product you make, supply, or sell causes injury or property damage. For many UK firms it is a core part of a safe risk portfolio. Claims are common in the UK’s active insurance market and can be expensive, particularly where multiple customers are affected or products are widely distributed.

Nearly half of UK SMEs operate without any business insurance, and many more are underinsured. That gap puts balance sheets and reputations at risk. At the same time, the market is competitive in 2025, with broader coverage and fewer exclusions available in many policies. Limits up to £20 million are accessible for a wide range of sectors, which can be crucial when dealing with serious injuries or large-scale recalls.

This guide explains what product liability insurance does and does not cover, how claims typically unfold, and the choices you can make to right-size your policy. It also highlights emerging risks, such as cyber-related defects in connected products and heightened exposures in construction following tighter building safety regulations.

Insurance can only protect you when you understand what is covered - and where the gaps might be.

Our goal is simple: provide clear, balanced information so you can assess your exposure, compare options confidently, and avoid surprises later. No jargon, no pressure. Just straight facts to help you choose cover that fits the way you trade.

What is included, what is not, and how claims work

Product liability insurance generally covers your legal liability if a product you manufacture, distribute, or sell causes third-party injury or property damage due to a defect or failure to provide adequate warnings. Policies often respond to compensation awards, claimant legal fees, and your defence costs. If multiple claimants are involved, cover limits and aggregates become critical.

Typical inclusions extend to products you have supplied in the UK and abroad, contractual liability you have assumed in standard terms, and vicarious liability for suppliers or subcontractors you are responsible for. Many policies can be tailored, for example adding excess layers to increase overall limits, or combining with public liability.

Exclusions vary, but you will often see limits around product performance guarantees, known defects, deliberate acts, gradual pollution, US and Canada exports, and certain high-hazard sectors without specific underwriting approval. Wear and tear, product recall costs, and fines and penalties are commonly excluded unless bought back as add-ons.

A straightforward claim might involve a customer injury from a faulty component. You would notify the insurer promptly, share product and batch data, cooperate with investigations, and let the insurer handle defence and settlement. More complex cases may include cross-border sales, allegations of inadequate warnings, or cyber-related failures in smart devices. In all cases, accurate documentation and timely notification help preserve cover.

Who benefits most - and when it may be optional

This insurance is particularly valuable for manufacturers, importers, wholesalers, retailers, and online sellers, including marketplace traders who may be deemed producers in the UK. It is also relevant for businesses involved in the construction supply chain where product standards and fire safety obligations have strengthened, increasing potential exposure.

Businesses that integrate software or connectivity into physical products gain protection against third-party injury or property damage arising from defects with a digital trigger. Service firms that also provide products may hold professional indemnity alongside product liability to address both advice and product risks.

It may be less essential for companies that do not make, modify, or supply physical goods, or that only provide services without delivering tangible products. Even then, consider whether you provide spare parts, packaging, or instructions that could influence product safety.

Choosing your cover - levels and useful add-ons

1. Entry Level - core liability

   • Third-party injury and property damage from defective products
   • Lower limits suitable for low-risk goods and small batch volumes
   • Basic territorial cover and standard exclusions

2. Standard - broader protection

   • Higher limits and aggregate options for growing firms
   • Worldwide exports excluding US and Canada as standard, with buy-backs possible
   • Enhanced defence costs and clearer wording on labelling and instructions

3. Comprehensive - high limits and complex risk

   • Limits available up to £20 million via excess layers for larger exposures
   • Tailored endorsements for regulated sectors, supply-chain indemnities, and major retailers’ requirements
   • Claims-made or occurrence structures aligned to your contracts

4. Optional add-ons to consider

   • Product recall and contamination costs - logistics, disposal, PR, customer notifications
   • Cyber-triggered bodily injury or property damage - for connected or smart products
   • North America exports - subject to underwriting and higher deductibles
   • Inefficacy or performance extensions - where product failure causes financial loss without damage
   • Non-negligence cover on project sites - helpful for construction supply interactions
   • Motor third-party property damage extensions where products interface with vehicles

Choose limits that reflect worst-case scenarios, not average claims.

What it costs and what drives the price

Prices vary and are not guaranteed. Claims inflation and supply chain costs may still affect future premiums.

Are you eligible and what will you need

Most UK businesses that make, modify, import, distribute, or sell products can apply. Insurers usually ask for your turnover split by product line and geography, details of your supply chain, batch traceability, testing regimes, and compliance certifications such as UKCA or sector standards. Contractual terms, especially indemnities with retailers or principal contractors, are reviewed.

Common restrictions include high-hazard products without suitable controls, exports to North America without prior agreement, and known defects or ongoing recalls. You may be declined for poor claims history, inadequate quality assurance, or incomplete documentation. Being open about your processes, change control, and post-sale monitoring improves underwriting outcomes and helps tailor the wording to the way you operate.

From quote to claim - the steps made simple

1. Gather turnover, product lists, territories, testing and traceability documents.
2. Request quotes with desired limits, deductibles, and key endorsements.
3. Disclose risks fully and answer insurer questions accurately and promptly.
4. Compare policy wordings, exclusions, aggregates, and defence cost provisions.
5. Choose a cover level and complete proposal forms or statements of fact.
6. Bind the policy, diarise renewal dates, and store documents securely.
7. If an incident occurs, notify immediately and preserve product and records.
8. Cooperate with investigations while the insurer manages defence and settlement.

Balanced view - strengths and trade-offs

Key checks before you commit

Take time to understand your limit of indemnity, the annual aggregate, and any sub-limits for defence costs or specific hazards. Review the excess you must pay on each claim and where buy-backs are available for risks like product recall. Scrutinise territory and jurisdiction clauses, especially if you export or sell online. Confirm how your policy defines a defect, what triggers a claim, and any retroactive dates. Ask how renewals are priced after a loss and what documentation you must keep to satisfy conditions on traceability, batch control, and quality assurance. Keep an eye on claims inflation and supply costs that can affect future premiums.

Alternatives and complementary covers

1. Public liability insurance - for injury or property damage not caused by a product you supplied.
2. Product recall insurance - covers recall and replacement costs, logistics, and crisis communications.
3. Professional indemnity insurance - for financial losses from negligent advice, design, or specifications.
4. Cyber insurance - addresses data breaches, ransomware, and network security incidents.
5. Employers’ liability insurance - separate legal requirement for most UK employers dealing with workplace injuries.

Frequently asked questions

Q: Is product liability insurance a legal requirement in the UK? A: It is not a general legal requirement, but many contracts with retailers or principal contractors demand it. Some sectors treat it as essential best practice due to higher injury and damage exposures.

Q: How much cover should I buy? A: Consider worst-case scenarios, not average losses. Think about batch sizes, supply chain reach, export markets, and the potential for multiple injuries. Limits up to £20 million are commonly available via excess layers.

Q: Does it cover product recalls? A: Standard policies usually exclude recall costs. You can add dedicated recall cover to address logistics, disposal, and communication expenses. Check sub-limits and notification conditions carefully.

Q: What about smart or connected products? A: Many insurers now consider cyber-triggered injury or damage, but coverage varies. You may need endorsements to ensure software or connectivity-related defects are included. Pure financial loss from cyber events is typically excluded.

Q: How do market conditions affect my premium? A: Increased insurer competition in 2025 has generally eased prices and broadened cover. However, claims inflation and large losses can still push rates up at renewal. Your risk controls remain a key driver.

Q: Are construction suppliers facing higher risks? A: Yes. Post-Grenfell regulation has raised accountability for cladding, fire safety, and related product performance. Robust documentation, testing, and appropriate limits are essential for these trades.

Q: If I only resell products, do I still need it? A: Possibly. UK law can treat importers and own-brand sellers as producers. If your branding, packaging, or instructions contribute to a defect, you may face liability and should consider cover.

Ready to move forward

If product liability fits your risk profile, compare policies from multiple insurers, check key exclusions, and stress test the limit against a worst-case event. Take your time, ask questions, and choose cover that aligns with how and where your products are used.

Important note

This guide is general information, not personal financial advice. Policy terms vary between insurers. Always read the schedule and wording, check limits, exclusions, and conditions, and seek professional advice if you are unsure about suitability for your business.