Why You Need Product Liability Insurance For Your Small, Self-Run Business

Posted on: 18 June 2015

Many people have small businesses they don't even think of as businesses at all. If you're producing anything, selling it, or giving it away, you're creating liability. That's why you should consider product liability insurance to protect yourself.

Even if You Don't Think You Need It

You may not think you need product liability insurance for your business for many reasons.

  • You run what you consider a tiny business, with few customers
  • You don't make many sales; your business is more like a hobby
  • You didn't know what you did was a business

If you make something and it goes from your hands to another's, you are running a business. It doesn't matter if it's just you, or if it's you and others. It doesn't matter if you profit or not. The point is, you create a whole world of liability by engaging in a transaction. For example,

If you produce small buttons made of yarn, and someone finds some kind of way to hurt themselves with it, that person can sue you. It doesn't matter if you sold it, gave it away, or if the person received it as a gift from someone else.

If you make cupcakes in your own kitchen and sell them for a pittance at a church or work, and someone becomes sick after eating one, they can sue you.

You hold liability, and you have to remember that. Your business, even if you don't consider it as such, is a sole proprietorship. That means, unlike a corporation or other business structure, you personally hold full liability.

What Can Someone Sue You For?

When it comes to product liability, charges against you can fall into three categories.

Manufacturing or production flaws – When a flaw during manufacturing or production causes personal or property damage. For example, if you produce a button with a bent needle that some unsuspecting person pokes themselves with, or if you bake a cupcake and accidentally include the wrong ingredients, this can be considered flawed manufacturing.

Design defects – When the design itself just isn't safe. For example, if you create a button where the pin is made from a toxic metal, or if you bake a cupcake so thick it can cause someone to choke, this can be considered a design defect.

Defective warnings or instructions – When you supply warnings or instructions with your product that don't adequately outline the possible dangers associated with that product. For example, your button says, "pin the button safely to avoid possible harm," but doesn't say how to do so or your cupcake packaging says "Eat responsibly to avoid choking," but there's no indication of what eating something responsibly means -- these can be considered defective warnings.

As you can see, someone can fall victim to one or all three of these. They can sue you for each one, and they may win. That's why you need product liability insurance, from a company like Dennis Homeniuk Insurance & Financial Services Inc Commercial Insurance, to protect you.

Only One Small Part of the Package

Product liability insurance is only a part of a larger general liability business insurance package. Sometimes business insurance packages do not automatically include product liability. Make sure yours does, or add it separately.

If you have a small business, even a tiny one, you should do yourself a favor and speak to commercial insurance provider. Business insurance isn't just for the larger services out there. It's for everybody who has a business.