Central Insurance Blog

For manufacturers, distributors, and retailers, bringing products to market isn’t just about innovation and efficiency; it’s about managing risk. One defective product can lead to costly lawsuits, reputational damage, and even the closure of a business. That’s why having proper product liability insurance is essential in protecting your business.

In this article, Thomas McMillan, commercial lines staff underwriter at Central Insurance, explores why product liability insurance matters—not just as a budget line item, but as a vital form of protection in today’s uncertain landscape.

The Difference Between Product Liability and General Liability

Product liability insurance can cover claims related to defective products that cause bodily injury, property damage, or financial loss. While this may sound similar to general liability insurance, knowing the distinction is important.

“Premises liability often covers things like someone getting injured on your property,” McMillan explains. “Product liability, on the other hand, kicks in when a product made, sold, or distributed by your business causes harm after it leaves your control.”

A Closer Look: If a visitor slips and falls at your facility, that incident typically falls under premises liability, which is covered by a general liability policy. However, if a product you manufacture causes injury or property damage after it has been sold and left your control, that’s considered a product liability exposure—addressed under the products-completed operations hazard within your commercial general liability coverage.

Who Needs Product Liability Insurance?

Proper product liability coverage can be the difference between a manageable claim and a business-ending loss for manufacturers, wholesalers, and retailers alike. 

However, any business involved in designing, manufacturing, distributing, or selling physical products should strongly consider this crucial protection. 

According to McMillan, the industries where it’s most critical include:

• Food and beverage
• Electronics
• Consumer goods
• Industrial components

Distributors and retailers are also at risk. “It’s not just the manufacturer who can be named in a lawsuit,” McMillan points out. “Anyone in the supply chain can be held responsible.”

Digging Deeper: Recent data underscores how common and far-reaching product liability risks are. In 2024 alone, more than 3,300 product recall events across major industries impacted over 83 million units. These figures highlight how even one product defect can escalate into widespread liability, legal exposure, and reputational damage—making coverage not just smart, but essential.

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What Does Product Liability Insurance Cover?

According to McMillan, product liability insurance policies can provide coverage for:

•  Design defects, including inherent flaws in the product’s blueprint.
•  Manufacturing defects, such as mistakes that occur during production.
• “Failure to warn,” including a lack of adequate instructions or visible safety warnings.

Coverage usually includes bodily injury, property damage, and the legal defense costs to navigate a lawsuit. 

“Defense costs without proper coverage can be staggering,” McMillan notes. “Even if you’re not found liable, just going through litigation can be financially devastating.”

Beyond coverage for design and manufacturing flaws, product liability insurance can also protect your business from financial fallout tied to reputational harm and business interruption. 

What Steps Can You Take to Minimize the Risk of Product-Related Claims?

In addition to having adequate product liability coverage, there are steps you can take to minimize the risk of product-related claims. Here, McMillan outlines his best advice for businesses looking to invest in risk mitigation:

1. Quality Control is Priority

Ensuring quality at every stage—from design to distribution—is key to preventing defects. McMillan notes that product liability stems from the production process, not just the result. A strong, standardized quality control system is your business’s first layer of protection.

2. It’s All in the Details

Documentation is key when it comes to product liability, and McMillan stresses the importance of maintaining thorough records. “Keep detailed documentation of product design, testing procedures, safety reviews, and customer complaints,” he says. “That information is invaluable when it comes time to defend a claim—or even to prove you took every precaution to avoid one.”

Not only can this documentation protect your business during a lawsuit, but it can also potentially reduce premiums. “Insurers look for those controls. They demonstrate that the business is serious about safety and responsibility,” McMillan adds.

3. Make it Clear

Many “failure to warn” product liability claims arise not from faulty products, but from inadequate warnings about potential risks. Supplying clear safety instructions, warning labels, and user manuals helps educate consumers and offers legal protection for your business.

4. Routinely Evaluate Supplier and Partner Contracts

Businesses that partner with third-party manufacturers, distributors, or retailers should clearly outline roles and responsibilities. McMillan advises reviewing supplier contracts carefully to confirm that indemnification clauses and liability obligations are well defined.

The Importance of Working With an Agent Who Understands Product Liability

When you work with an agent who understands the manufacturing space, they’ll know the right carriers, the appropriate coverages and endorsements, and how to tailor the policy to your specific operations and exposures. 

In general, your insurance coverage should evolve with your business. Whether you’re launching a new product, expanding distribution, or outsourcing manufacturing, it’s important that you update your agent regularly so they can adjust your coverage accordingly. “Risk is dynamic,” McMillan says. “And coverage should be too.

The Central Insurance Difference

Central brings deep industry experience and competitive pricing to the product liability space—especially for light industrial businesses. 

“We’ve built a robust product profile and have grown significantly in this area over the last few years,” McMillan explains. “Our light industrial program is highly sought after, and our general liability rates are especially favorable for electronic manufacturers, plumbing supply companies, and other household manufacturing sectors.”

But beyond the numbers, it’s the service that stands out. “We have manufacturing subject matter experts on our underwriting team,” he adds. “That specialization helps ensure businesses get the coverage they need—not just a generic policy.”

With a focus on being a true partner to agents and insureds throughout the policy life-cycle, Central representatives are available to help answer questions, walk through complex risks, and assist when needs change. This proactive, collaborative approach is especially valuable for manufacturers introducing new products or expanding into different markets, where exposures can shift quickly.

Central offers customizable commercial insurance solutions designed to protect your property and operations with competitive rates, tailored coverage, and trusted service. Connect with an agent today to explore how we can help safeguard your business.