Product liability insurance protects manufacturers and sellers from being sued for damage caused by their products. Coverage varies based on industry and government regulations, and a broker assesses the business before issuing a quote. This insurance can prevent bankruptcy in the event of a lawsuit.
Product liability insurance is protective coverage that prevents manufacturers and sellers from being sued for damage caused by the use of a given product. In the event the manufacturer, distributor, or dealer who sold the product is sued, the insurance handles payment of any amounts awarded by the courts, thus avoiding financial loss to the defendant. Product liability insurance is considered a necessity for almost any type of business engaged in the task of manufacturing.
There are provisions and limitations that apply to almost any type of product liability insurance. Policies for small businesses will include coverage similar to that extended to large corporations, although the amount of coverage small businesses can receive is typically much less. There is also some variation depending on the type of industry and the amount of risk involved with the products made available to consumers. For example, food liability insurance is likely to be more comprehensive than for companies that produce bedding or fabrics.
Insurance laws and regulations in force in the country where the company is headquartered also help define the scope of this type of insurance. A product liability insurance broker can advise the company on what types of coverage and the associated amounts are currently available within the guidelines set by government agencies. In some countries, the rules and regulations that apply to this type of insurance are very broad; Other nations have very specific regulations in terms of qualification for this type of coverage, as well as the amount the provider can charge for coverage.
A qualified broker will not just write a policy at the behest of a company. Instead, he will assess the nature and volume of the business, including the types of products sold through various outlets. Once the company and its products are evaluated and rated according to the insurance provider’s standards, the company is issued a quote on coverage, including premium and payment terms. As long as the business complies with the terms of the contract and makes scheduled premium payments, the insurance will likely remain in force.
As with most types of insurance coverage, manufacturers and dealers hope that they never have the opportunity to use their product liability coverage. However, if a consumer files a legal action that is deemed reasonable and enforceable by a court of law, the insurance will make it possible to settle the claim quickly. In many cases, product liability insurance can mean the difference between company dissolution and bankruptcy, or the opportunity to resolve the dispute, make the appropriate changes to the product, and continue operating.
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