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I sell Products – Should I continue buying Liability insurance?
If you sell a product, you will have a long term exposure to the potential of injury or damage resulting from the use and operation of your product, thus the need for Product Liability insurance.
Liability insurance policy has two sections of cover – Public Liability and Product Liability, and most of the time the insurance is purchased collectively, as there is no need to separate the covers, and most businesses have a Public and a Products exposure. The product liability insurance applies where you have sold your product and the product leaves your control (the liability links to the product), and the Public Liability responds to an action of a person or the business.
The insurance cover responds to a claim for compensation based on an allegation of negligence that results in injury and/or damage to another person. The sale timeframe of a product has no relevance to the insurance as the sale does not trigger the injury or damage. Therefore the insurance benefit applies when the injury and/or damage occurred, and not when the product was sold.
I sell a product at a market this weekend, and the customer takes my product home and puts it on a shelf for a month. I have Liability insurance which is due in a week. I do not renew my Liability insurance because I will not be working at the market any more.
After a month the customer opens my product and tries to use it. The product causes an injury.
Even though I sold the product when I did have insurance, the injury occurred after I let my insurance lapse, so I have no insurance protection for the injury and resulting claim for compensation.
In order to protect myself, I would need to continue to buy Liability Insurance so that I have a level of financial protection against the potential of a claim for injury and/or damage at a later time.