What is product liability insurance?
Product liability insurance can cover your legal liability to compensate someone for personal injury or property damage arising from products connected with your insured business. It may also respond to approved defence costs. It is commonly arranged with public liability, but the products, activities and territories accepted by the insurer still matter.
This can be relevant to manufacturers, importers, wholesalers, retailers and businesses that supply goods through an installation or repair service. The Australian Government’s business insurance guidance identifies goods suppliers among the businesses that may need this protection. Selling from home or through an online marketplace does not remove the need to assess your exposure.
Start with a simple question: if something you supply injured a customer or damaged their premises, which policy would you contact? Our product liability glossary entry explains the terminology.
What a product liability policy may cover
The central issue is an allegation that your product caused injury or damage to someone else’s property. For example, a customer might allege that a supplied appliance started a fire, or that a packaged food product caused illness. An allegation is not proof of liability; the circumstances and evidence need investigation.
When comparing options, ask about compensation, defence costs, the definition of a product and how related claims are grouped. Check whether defence costs sit inside or outside the stated limit and whether consent is required before appointing lawyers. An aggregate limit can restrict the total available across product claims during the policy period.
Underwriter QBE describes public and product liability protection and optional extensions, illustrating why the actual wording matters. This is a general explanation, not a promise that every policy includes the same benefits.
Public liability, product liability and product recall
Public liability insurance addresses risks associated with your business activities, such as a visitor alleging injury at your premises. Product liability focuses on goods supplied by the business. A combined policy may address both, provided the business description and selected cover are appropriate.
Product recall is a separate question. Withdrawing a batch, contacting customers, transporting returned goods and destroying stock can create costs even before anyone makes an injury claim. Do not assume those costs are included in ordinary product liability insurance. Ask specifically about a recall extension or separate cover, its trigger and its limits.
If you charge for design, specifications or technical advice, discuss professional indemnity insurance as well. A defective product claim and an allegation of incorrect professional advice can raise different insurance issues.
Exclusions and conditions to check
Discuss the following questions before comparing premiums:
- Does the policy cover every product category you supply, including own-brand goods and newly introduced ranges?
- Are there restrictions on exports, overseas courts or particular destinations?
- How are replacement of the defective product itself, rework, refunds and recall expenses treated?
- Does an agreement with a distributor create liabilities beyond those covered by the policy?
- Are particular ingredients, components, uses or customer industries excluded?
Give your broker copies of important supply agreements. A customer requesting a certificate of currency may also request wording about indemnities or additional insured parties; the certificate alone does not establish that every contractual obligation is insured. See our explanation of contractual liability.
Business changes deserve a fresh conversation. Importing a different product or starting overseas sales can alter the risk substantially.
Manufacturers, importers and online sellers
Map the supply chain before requesting a quote. Record who designs, manufactures, tests, labels, imports and distributes the product. If your name appears on the packaging, explain that arrangement. An overseas supplier’s insurance should be reviewed for its relevance to your business rather than assumed to protect you.
The ACCC’s product safety and liability guidance explains that Australian Consumer Law regulates product safety and responsibility for unsafe goods. It includes standards, bans, recalls and reporting obligations. Insurance does not replace those responsibilities or confirm that a product meets a standard.
Useful preparation includes keeping supplier identities, batch references, instructions, testing records and customer distribution information together. For an online seller, connect each listing to the actual supplier and product version. For a manufacturer, describe how a component change is recorded. These practical records can make a product complaint easier to investigate.
What to do when a product complaint escalates
If someone reports an injury or property damage, record what they say, the product identifier, purchase details and any immediate safety concern. Notify your broker or insurer promptly and retain correspondence, photographs and relevant goods where safe. Avoid discarding evidence or agreeing a legal settlement before discussing the claim requirements.
Keep consumer safety action separate from the insurance decision. Urgent safety or reporting duties should not wait for confirmation of cover. The ACCC’s product safety responsibilities page explains mandatory reporting for serious injury, illness or death associated with supplied consumer products, including the two-day reporting requirement, and notification requirements for voluntary recalls.
Ask for legal or product safety advice if the situation is unclear. Our insurance claims page provides a starting point for arranging broker assistance. Any example on this page is illustrative; an insurer determines the response under the applicable contract.
What influences a product liability insurance quote?
A meaningful quote starts with what you sell, not just your business name. Explain the product’s purpose, intended users, annual sales, import and export arrangements, past incidents and proposed liability limit. A decorative homeware item and a component intended for safety equipment create different questions even if their sales values match.
Prepare a short product schedule with your main categories, where they are manufactured, the countries where customers receive them and any planned changes. Include the largest customer contract and your existing policy schedule. If details are uncertain, identify the gap rather than guessing on a proposal.
Ask BAU Risk to explain the differences between available terms, including the excess, exclusions and applicable limits. A lower premium is only useful if the quoted cover fits the activities you need insured.
Connect product cover with your wider business insurance
A product claim is one part of a broader business risk review. Property insurance addresses physical assets; business interruption insurance addresses specified financial consequences of an insured interruption. Neither should be treated as a substitute for product liability.
Explore our manufacturing, wholesaler and retail business insurance guides for related operational risks. When you contact BAU Risk, tell us what your products do and where your customers use them. That gives the discussion a practical starting point.
Frequently asked questions
Do retailers need product liability insurance if they did not manufacture the goods?
Retailers can still face product-related complaints and claims. Explain what you sell, your suppliers and any imports or own-brand arrangements so the exposure can be assessed. Do not assume the manufacturer’s policy automatically protects your business.
Is product recall included?
Do not assume it is. Recall expenses can require an extension or a separate policy with its own trigger. Ask about customer notification, transport, disposal and other withdrawal costs before choosing cover.
Can an Australian policy cover overseas sales?
Some policies can accommodate overseas products exposure, but territories and legal jurisdictions require specific checking. Disclose the destination countries, including indirect exports you know about, and obtain confirmation before relying on cover.
Does insurance pay for every faulty product refund?
No. Product liability insurance is not a general product warranty. Refunds, replacement of the product itself and compensation for resulting injury or damage involve different questions. Check the wording and your consumer law obligations.
A few minutes. A different perspective.
Put your thinking
into practice.
Three situations for product liability businesses. Choose a practical next step, then explore why the details matter.
A learning activity with hypothetical situations. It is not a risk assessment, personal advice or a prediction of insurance cover.
What would you do next?
Work through the facts, the records and the questions you would take to your broker. There is no time limit.
Related insurance and useful terms
Property Insurance · Public Liability Insurance · Business Interruption Insurance · Professional Indemnity Insurance · Workers Compensation Insurance · Management Liability Insurance · Cyber Insurance
General information only. This does not take into account your objectives, financial situation or needs. Before acting, consider whether the information is appropriate for you. Cover is subject to insurer acceptance and the policy terms, conditions, limits and exclusions. Read the Financial Services Guide and the relevant PDS (where applicable) and/or policy wording before deciding.
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