Products-completed Operations Vs. Product Liability Insurance: How Are They Different?

Product liability insurance is a crucial investment for businesses that make goods or offer certain services. For example, it can protect your company from substantial losses if you’re successfully sued, for making equipment that ends up injuring or harming a user due to design or manufacturing defects. Contractors that construct or install roofs, buildings, wiring, etc., face similar risks day-to-day.

While general liability insurance offers a degree of protection against property damage and bodily injury claims, it may not be enough for many of these businesses. This is where product-completed operations coverage usually comes into play. Read on to learn more about securing complete protection against common business liability risks.

What Is Products-completed Operations Insurance?

Products-completed operations coverage is a form of product liability coverage for bodily injury and property damage claims, arising out of finished products or services. It may be available under general liability or business owner’s policy insurance.

Take the example of a building component that collapses due to structural design flaws, long after the construction project is completed. The contractor may be liable for the damage and any injuries or fatalities that may result from the tragedy. Products-completed operations insurance usually covers such liability claims.

What Is Product Liability Insurance?

Product liability insurance covers liability claims that may result from a product you made and can include finished works or completed operations. It provides both property damage and bodily injury liability protection and is usually a part of general liability policies.

Certain types of businesses or industries need this policy because they are highly prone to costly product liability lawsuits. Depending on the extent of injury or damage, it may cost about $1.5 million on average to settle a product liability claim. You may consider getting this coverage if your business:

  • Makes potentially hazardous products like insecticides or drugs
  • Makes consumer products like clothes, detergents, or toys
  • Distributes or retails product components

Keep in mind that product liability protection is harder to come by under standard general liability coverage for some high-risk businesses. In such cases, it may be necessary to purchase products-completed operations coverage from a specialty carrier.

Isn’t General Liability Insurance (GL) Enough?

General Liability coverage is a necessity for most businesses. Customers slipping and falling on your premises or clients suing a contracting company for property damage are typical liability claims covered under GL insurance. The policy can pay for medical expenses and legal defense fees associated with such liabilities. If you’re sued for defamation, GL can also protect you.

However, this policy is general in nature and may not cover certain issues arising from the use of your product or service. Therefore, you may need to get product liability insurance for specialized coverage. Make sure to discuss your exact coverage needs with your agent, as they can share insights on product liability issues that are specific to your industry.

How Much Product Liability Insurance Do I Need?

Your product liability coverage requirements will depend on factors such as:

  • The type of products you make or sell (potentially hazardous products cost more to cover)
  • Your sales volume
  • The various parties involved in the manufacturing process
  • Production rate (high output increases the risk of producing defective products)

A proper understanding of how product liability insurance works can help you select the right standard and supplemental policies to maximize loss protection. If you would like to optimize your existing insurance coverage, contact our experts at Modab Insurance Services today.

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