Covered or Not? What Online Sellers Must Know About Product Liability Insurance
As an online seller, your job doesn’t end once a product leaves your hands. If your product causes injury or damage even if it was manufactured by someone else—you could face legal action and financial losses.
Product Liability Insurance is designed to protect businesses like yours from the fallout of product-related accidents. But what exactly does it cover—and what doesn’t it?
Here’s a breakdown based on real policy wordings to help you understand the scope of your protection.
What’s Covered?
According to standard product liability insurance terms, the policy protects you against:
1. Legal Liability for Third-Party Bodily Injury
If a customer suffers physical injury caused by using or consuming your product, the policy covers:
- Medical expenses
Compensation for pain and suffering Death or disability claims
Example: A customer develops a severe rash after using your skincare product.
2. Third-Party Property Damage
If your product causes damage to someone’s property, such as fire, breakage, or staining, the insurer will cover the costs of repair or replacement.
Example: A faulty electrical item overheats and damages the customer’s furniture.
3. Legal Defense Costs
The policy also covers your legal defense—even if the claim is groundless—subject to the insurer’s consent and within the policy limits.
Example: You’re sued for injury allegedly caused by your product. The insurer pays for your lawyers, court proceedings, and settlement negotiations.
4. Worldwide Coverage (Optional Add-On)
Some policies offer coverage for exports, provided your products comply with local regulations in the destination country.
5. Indemnity for Compensation
You will be indemnified for the amounts you’re legally obligated to pay for claims arising from a defective product during the coverage period.
What’s Not Covered?
While the coverage is comprehensive, standard exclusions include:
Product Recall Costs
If you need to withdraw a product from the market, recall expenses aren’t automatically covered unless added.
Contractual Liability
You’re not covered for promises made in contracts that go beyond your legal liability.
Poor Workmanship or Product Performance
The policy won’t pay for damage to the product itself or for complaints about its quality or expected results.
Deliberate Misconduct or Fraud
Any claim arising from your intentional wrongdoing or fraud is not covered.
Infringement & Intellectual Property Issues
You can’t claim for damages due to copying or using another brand’s design or logo.
Wear & Tear or Gradual Damage
If the product simply stops working after regular use, that’s not a liability claim.
Note: The incident must occur during the policy period and be reported promptly. Late notification may void your claim.
What’s Not Covered?
While the coverage is comprehensive, standard exclusions include:
Product Recall Costs
If you need to withdraw a product from the market, recall expenses aren’t automatically covered unless added.
Contractual Liability
You’re not covered for promises made in contracts that go beyond your legal liability.
Poor Workmanship or Product Performance
The policy won’t pay for damage to the product itself or for complaints about its quality or expected results.
Deliberate Misconduct or Fraud
Any claim arising from your intentional wrongdoing or fraud is not covered.
Infringement & Intellectual Property Issues
You can’t claim for damages due to copying or using another brand’s design or logo.
Wear & Tear or Gradual Damage
If the product simply stops working after regular use, that’s not a liability claim.
Note: The incident must occur during the policy period and be reported promptly. Late notification may void your claim.
How Do Claims Work?
To submit a claim, you generally need to:
- Notify the insurer as soon as the incident is known
- Provide supporting evidence (photos, customer complaints, receipts, etc.)
- Avoid making any admissions or offers without the insurer’s approval
- Allow the insurer to appoint lawyers and manage proceedings
Who Should Buy Product Liability Insurance?
You need this coverage if you sell or supply:
- Food, drinks, or health supplements
- Electrical appliances or accessories Baby products or toys
- Kitchenware or home improvement tools
- Skincare, beauty, and personal hygiene items
Even if you’re a reseller or e-commerce dropshipper, you are still part of the supply chain and can be held responsible.
Final Thoughts
No matter how small your operation, the moment your product enters a customer’s home, you take on a legal risk. If anything goes wrong, you could be sued—and without the right insurance, you’re on your own.
With Product Liability Insurance, you gain:
✅ Financial protection
✅ Legal defense coverage
✅ Peace of mind to grow your online business with confidence
Don’t wait until a complaint becomes a crisis. Protect your e-commerce brand today.