How Much Public & Product Liability Insurance Do I Need? | Indemnity Limits 101

How Much Public & Product Liability Insurance Do I Need? | Indemnity Limits 101

While most organisations make the quality of their products and services a top priority, there's always a chance of mistakes.

Unfortunately, those mistakes can be costly for both customers and your business.

What is Product Liability Insurance?

Product Liability Insurance covers you for damages and injuries caused by a product you have supplied, designed or manufactured.

If you are a product manufacturer, retailer, wholesaler, designer, distributor etc. You should definitely consider having Product Liability cover in place.

However, it is not always obvious who should take up cover.

WHAT IS PUBLIC LIABILITY? DO I NEED IT? - FIND OUT MORE HERE.

GET A QUOTE

Public Liability Insurance or Product Liability Insurance?

Whether it be a faulty product or personal injuries to a member of the public on company property, it is vital to ensure that your organisation has the correct level of cover for these potential liability claims.

Due to the amount of crossover in cover, Public and Product Liability Insurance are often offered together as a joint-protection package for all types of business owners.

Where do Public Liability and Product Liability Cover Crossover?

Both offer cover if a third party suffers property damage, disease, illness, injury or death, but which liability policy responds will depend on what part of your business activities caused the loss.

Following a claim, both will cover the cost of compensation payable to the claimant and any potential legal fees up to your indemnity limit.

Due to the wide range of incidents that can occur, it is crucial to set accurate indemnity limits to ensure you meet customer's needs.

You must be aware of potential exclusions or conditions in your policy and engage in proper risk management strategies to avoid potential liabilities.

5 MYTHS ABOUT PUBLIC LIABILITY INSURANCE - Find out more here.

What Does "Indemnity Limit" Mean?

In insurance, your indemnity limit is the maximum amount that an insurer will pay out on your policy during the policy period. It may also refer to the maximum you can claim per claim depending on the policy. When you purchase cover, be sure to check with your broker which this is. If you've already purchased cover, your indemnity limit and terms will be outlined in the policy wording.

Do I need Public or Products Liability Insurance?

For most businesses, the answer is usually yes. You should consider a products/public liability policy in general but especially if any of the following are true:

  • You manufacture products
  • You sell or hand out products with your organisation name or brand on them
  • You import products from outside the EU for UK sales
  • You repair or repurpose products
  • You sell products for which you cannot identify the manufacturer, or the manufacturer has gone out of business
  • You or your employees work at client sites, on public property or within a client's home
  • Your business organises off-site events or activities attended by members of the public
  • You or your employees interact with third parties while working or providing services

How much Public and Product Liability Insurance do I Need?

Once you have decided to purchase public and products liability insurance cover, it is important to consider your indemnity level.

As mentioned earlier, this means the maximum amount of compensation that your insurer will offer you in the event of a claim.

Choosing the right level of indemnity is important because this will determine whether or not your organisation can meet customers' needs, maintain financial stability and protect their reputation in the event of a liability dispute.

Consider the following when selecting the level of indemnity for public liability:

  • What is the value of your premises? This includes if multiple locations are being covered under one policy. This is important as more expensive properties, or multiple premises, will typically require higher indemnity limits.
  • How many people are in the surrounding areas around your premises? Are you in a town or the middle of nowhere? How many people face the risk of harm on your organisation's premises such as customers or members of the public? For instance, a business that has a large number of customers on their property should consider higher indemnity limits.
  • What is the nature of the area surrounding your organisation's property? What is the proximity?
  • Does the nature of your business activities have the potential to cause harm?
  • Does your business have any risk management programmes in place to protect against public liability claims?
GET A QUOTE

Meanwhile, for your level of products liability, you should consider:

  • Do your products face North American exposures, as this region is likely to produce more (and greater) claims.
  • Who designs your products? Who provides your raw materials? Who manufactures your products and transports them? A partner organisation with lapse risk management policies can create liability claims for your organisation.
  • Many faulty product claims fall to the product manufacturers. However, they cannot always be traced, or, depending on the claim's circumstances, the fault is found not to lie with them. If you are a retailer, you should still have adequate liability coverage.
  • Are you selling second-hand products or white-label goods that would be hard to trace?
  • Does your organisation have a proper risk management system in place?
  • Do you have a rigorous programme that tests and checks products for potential faults of damage?
  • How much would your worst-case scenario cost you?
  • Do any of your contracts specify that you should have a minimum level of cover?

5 WAYS TO SAVE ON YOUR PUBLIC LIABILITY INSURANCE WITHOUT CUTTING DOWN COVER - Find out more.

What is an Aggregate Indemnity Limit?

In general, your indemnity limit can be one of two things, an "any-one-claim" limit or "in-the-aggregate".

The distinction is clear:

If your indemnity limit is Any One Claim, this means that your indemnity limit is the maximum you can claim for each incident during the course of the year.

For instance, if you had a large organisation and had 2 separate public liability claims in one year, the insurer would pay up to the limit (at least £2 million) on each claim.

Meanwhile, if your indemnity is in the aggregate, it is the maximum you can claim for the policy's duration, usually one year.

In the case of products liability cover: your indemnity limit is an aggregate limit which means that your £5 million (for example) of cover is the maximum you can claim for the policy's duration.

This is because in a products liability claim if a faulty product affects multiple people, it can lead to a series of claims once an individual customer has successfully made a claim. The insurer would pay all claims for that period of cover up to the limit, typically between £1 million and £5 million.

Meanwhile, in the event of a public liability claim, the insurer would pay up to the limit per claim.

What might not be covered by Liability cover?

Be sure to take note of any exclusions or conditions the insurer includes within the policy.

Potential exclusions could include liability claims for products exported to certain countries, while possible conditions could include that your organisation keeps appropriate risk management documentation.

No, neither are currently a general legal requirement for businesses in the UK.

However, when working for local authorities you may be asked to provide evidence of sufficient third-party cover before work commences. A similar rule may apply to any private construction or repair work, or any work in an event venue like setting up exhibitions or serving food and drink.

Some eCommerce platforms may require a minimum level of indemnity too. For instance, Amazon's Pro Merchants are required to have general liability as part of their terms and conditions.

Make sure you are aware of what is required of you and if there is a minimum indemnity requirement before you start trading.

JOIN THE DEBATE - SHOULD PUBLIC LIABILITY INSURANCE BECOME COMPULSORY? - Find out more here.

Do Public and Product Liability Cover My Professional Services?

While a product can have a broad definition, when talking about Product Liability cover, it only refers to a physical product.

When it comes to claims of professional negligence where your advice as an expert has been deemed to have breached your duty of care. You should look at Professional Indemnity cover for professional advice and services.

THE DIFFERENCE BETWEEN PROFESSIONAL INDEMNITY AND PUBLIC LIABILITY INSURANCE - Find out more here.

If you would like more information or are ready to get your free quote, visit our website or call us directly on 0330 124 0730.

GET A QUOTE