Product Liability vs. General Liability Comparison
Key Takeaways
- General liability insurance protects you against mishaps connected to your business activities or space.
- Product liability insurance protects you from harm from something you sold or made.
- Most general liability policies exclude product claims.
- Product claims involve issues in design, manufacturing, or missing warnings/instructions.
- Most businesses truly need both policies to cover all their bases.
If like countless other business owners, you’re also confused about what product liability and generate liability insurance mean and cover, you’re not alone. Let’s understand each of them one by one, what’s the difference between the two, and which one your company might need.
What is General Liability Insurance?
General liability insurance covers you for unexpected accidents that may happen with someone at your workplace or from an employee during working hours. For instance, someone getting hurt at your office or breaking something at a client’s site that might require funds to be replaced, they’re all covered under general liability insurance. So, in a nutshell, general liability insurance covers:
- Bodily injury
- Property damage
- Personal and advertising injury
What is Product Liability Insurance?
Product liability basically covers if something you sell ends up causing harm. Even if you just distributed or retailed it, you could be on the hook. These claims are usually for product defects, which include:
- Design defects
- Manufacturing defects
- Marketing defects (for instance, failing to warn about something)
Product Liability vs. General Liability: What’s the Real Difference?
Let’s quickly take a look at the differences between the two insurance.
| Feature | General Liability Insurance | Product Liability Insurance |
| Primary Focus | Your business operations, premises, and interactions. | The products you build, sell, distribute, or put your name on. |
| Typical Claims | Customer slips in your store; staff breaks a client’s window. | Customer injured by a faulty gadget; food causes an allergic reaction. |
| Source of Harm | Accidents during normal business operations. | Defects in design, manufacturing, or missing warnings/instructions. |
| When it Applies | While the business is operating, customers/visitors around. | After the product is out in the world and causing trouble for a user. |
| Who Needs It | Basically every business, especially with walk-in traffic or off-site jobs. | Any business making, selling, distributing, or branding physical products. |
Do You Need Both Types of Insurance?
Chances are, you probably do.
For instance, let’s say you have a cafe or a small business. Now, if someone gets injured at your studio or workspace, which requires huge medical bills, you’ll require general liability insurance to cover that.
Similarly, if the pre-built products you use in your salon for your customers or the ones you create and sell result in some mishap. In that case, you’ll need product liability insurance.
The important thing? One policy doesn’t cover for the other’s dangers. A general liability policy usually will not cover product-related harm once the item leaves your premises, and vice versa.
How Do You Pick the Right Coverage?
Sorting out insurance shouldn’t be a solo job. Begin by asking a few practical questions:
- Do you have a physical space where people might get hurt?
- Do you make or sell anything?
- Or, could your advice, service, or advertising cause someone to claim injury or financial loss?
If the answer to any of these questions is yes, then you need the insurance related to it. General liability insurance in the first case and liability insurance in the latter ones.
Frequently Asked Questions (FAQ)
Q: I run an online shop, but I don’t make the products. Am I still at risk for product liability lawsuits?
A: Yes. If a customer gets hurt or property is damaged by something you sold—even if you just shipped it out—you could be named in a lawsuit as part of the product’s distribution chain.
Q: Doesn’t my general liability policy automatically include product liability?
A: Usually, it does not.
Q: What does product liability insurance cost?
A: It depends on various factors—for instance, your products, number of sales, the history of your product claims, etc.Q: Can a business that mainly offers services be sued for product liability?
A: Yes, if your service includes providing a product, for instance, a beauty salon using a new hair treatment that causes a reaction, you could face a product-related claim.
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