Skip to main content
Ratehub logo
Ratehub logo

Compare Product Liability Insurance Quotes

Every business makes mistakes, but some cost more than others. If you manufacture, distribute, or sell products, having product liability insurance can protect you from a faulty product turning into an expensive lawsuit.

What is product liability insurance?

Product liability insurance, or product risk insurance, is a type of commercial insurance policy that covers you if you’re held liable for a product you manufacture, distribute, or sell. If your product causes a third party (someone unrelated to your business) to injure themselves or damages their property, you could face expenses for legal fees and compensatory damages. Having a product liability insurance policy, however, can cover these costs and get your business back on track as soon as possible. 

Why Ratehub.ca?

A few things we're proud of

  • 1,200,000

    monthly users

  • 9 years

    young

  • Over 1M

    better choices made

  • Trusted partner

    to Canada’s top financial institutions

Do I need product risk insurance?

If your business provides a product to your customers, consider adding product liability insurance to your commercial policy. You wouldn’t one claim to shut down your business operations completely, so it’s always a good idea to stay a few steps ahead financially. 

Example 1: A food poisoning incident at your restaurant may cause several customers to sue. Product liability insurance can help cover the expensive legal costs and damages you may incur. 

Example 2: The sweater your business manufactures uses a type wool causing rashes on your customer's skin. This results in a costly lawsuit, but your product liability insurance can cover the legal and damage fees. 

Businesses that should consider product liability insurance include:

  • Restaurants, coffee shops, and bakeries
  • Clothing stores
  • Pet stores
  • Gift shops
  • Specialty food stores
  • Cosmetic, skin care, body care, and hair care shops
  • Wholesalers, manufacturers, and suppliers
  • Software developers and web designers

Even if you run a small e-commerce business from your home, product liability insurance might be worth it. A common misconception is that small businesses don’t need business insurance because the likelihood of a lawsuit isn’t as probable with fewer customers. If someone sues you due to an allergic reaction from your homemade soap, you’ll rest easier knowing you have product liability insurance. 

What does product liability insurance cover?

Product liability insurance pays for damages (e.g. legal fees, medical expenses, compensatory damages) in cases of third-party bodily injury or property damage your product may cause. Product liability claims are typically a result of at least one of three reasons.

The product's design is faulty or unsafe before it's even put together (e.g. toxic materials chosen).

How much does product liability insurance cost?

The cost of product liability insurance will vary according to a few factors, but you can expect to pay about $0.25 for every $100 your company makes in sales. So if you sell $100,000 worth of products each year, product liability insurance will cost you about $250 annually.

Factors that go into your product liability insurance quote

Aside from the amount of coverage you’re seeking, business insurance companies will also look at a few other factors to calculate your quote. This includes the product type and quantity you sell, manufacture, or distribute, your business revenue, and your past insurance claims.

  1. Product type

    The type of product your business sells, manufactures, or distributes has an impact on your product liability insurance quote because different products present different levels of risk. A bookstore, for example, could technically be held liable for a paper cut – although it’s highly unlikely. On the other hand, a skin care manufacturer faces numerous product risks, from chemical burns to allergic reactions, ultimately resulting in a higher cost for product liability insurance.

  2. Quantity of products sold

    Depending on how successful your business is, you could be selling many more products than your competitors. This does, however, result in a higher cost for product liability insurance because there is a higher chance a customer could hold you liable for your product. For instance, a coffee shop that serves a few regulars each day probably won’t have too many legal issues, even if the milk was spoiled and caused food poisoning. However, if the same thing happened to your restaurant that receives hundreds of customers each day, there’s a higher chance a customer will speak up and file a claim.

  3. Revenue

    Your business revenue is also factored into the cost of your product liability insurance. A third party could claim more in damages if they know your business revenue is high enough for the pay-out. For example, a small start-up won’t have as much at stake in a legal battle in comparison to a well-known, successful company if a product turns out to be faulty. Therefore, the more money you make, the more you’ll likely have to pay for your product liability insurance premium.

  4. Past business insurance claims

    Insurers often look at any claims you’ve made in the past for your business to determine the likelihood of a claim in the future. If you’ve been known to mislabel the materials on your clothes, it’s quite likely it’ll happen again. So with a clean history comes cheap product liability insurance, but a not-so-clean history – that will raise your insurance quote.

Why do I need product risk insurance?

Anyone can make a mistake when working with a product, and sometimes, one small mistake can lead to larger repercussions. In some cases, you might not even be at fault, but a customer could still hold you liable if they believe your product caused them injury or damaged their property. Regardless, having product liability insurance provides you and your business with extra financial protection – just in case. Here are a few potential situations in which having product liability insurance could come in handy.

Design defects

Manufacturing defects

Marketing defects

Frequently asked product liability insurance questions

Is product liability covered under general liability?

How do I get product liability insurance in Canada?

Does product liability insurance cover you internationally?

Is product liability insurance mandatory?

Does product liability insurance cover services?

Author Bio

Matt Hands, Business Director of Insurance

Matt started his professional career at CARPROOF where he honed his marketing and analytical skills for over 3 years. Matt then took his wealth of experience to Ratehub.ca’s Toronto offices, working with insurance providers, agents, and brokers to grow and expand the Insurance business unit. He is a thought leader in the community and a valuable insurance resource to respected publications like the Globe & Mail, Toronto Star, Huffington Post, Yahoo News, and 680 news radio in Toronto.

The knowledge bank

A wealth of knowledge delivered right to your inbox

By submitting your email address, you acknowledge and agree to Ratehub.ca‘s Terms of Use and Privacy Policy. Contact us for more information. You can unsubscribe at any time.

About Ratehub.ca

We help you find better financial products for your specific needs. Whether you need a mortgage, credit card, savings account, or insurance coverage, we get you the information you need to choose better.

How does Ratehub.ca make money?

Financial institutions pay us for connecting them with customers. This could be through advertisements, or when someone applies or is approved for a product. However, not all products we list are tied to compensation for us. Our industry leading education centres and calculators are available 24/7, free of charge, and with no obligation to purchase. To learn more, visit our About us page.