What factors influence the cost of product liability insurance premiums?

One of the top priorities of every business is to protect it from potential risks and liabilities. Product liability insurance is a crucial component of your risk management strategy, providing coverage against legal claims and financial losses arising from defective products. However, there are certain factors that influence the cost of product liability insurance premiums.

Here are some factors that insurers consider when calculating product liability insurance premiums:

Nature of the Products:

The type of products your business manufactures, distributes, or sells plays a significant role in determining the insurance premium. Products that are considered high-risk or have a history of claims and incidents may result in higher premiums. For instance, products in the pharmaceutical or medical device industry may carry more significant risks compared to toys or household items.

Product Usage and End Users:

Insurers also consider the intended use of your products and the potential exposure to different user groups. Products targeted at vulnerable populations, such as children or elderly individuals, may lead to higher premiums due to the increased risk and severity of potential claims.

Claims History:

Your business's past claims history is another critical factor in assessing insurance premiums. A track record of product-related claims or defective products can indicate higher risk and may result in higher premiums.

Manufacturing Practices and Quality Control:

Insurers assess your business's manufacturing processes and quality control measures. Robust quality control practices can demonstrate your commitment to producing safe products, potentially leading to more competitive premiums.

Business Size and Revenue:

The size of your business and its annual revenue can also influence the cost of insurance premiums. Larger businesses with higher revenues may have higher insurance premiums due to the increased exposure and potential magnitude of claims.

Coverage Limits and Deductibles:

The amount of coverage you choose and the deductible you are willing to pay can affect the premium. Opting for higher coverage limits or lower deductibles may lead to higher premiums.

What to do next?

We at Insurance Unlimited will work with you to tailor a product liability insurance policy that best suits your business's needs. Our agency has access to multiple markets. We will find the right policy for you with the best rate.