Why Do Businesses Need International Product Liability Insurance?
If you’re a manufacturer, distributor, or sell physical goods, international marketplaces can offer untapped sources of revenue for your business. However, expanding your global footprint means increasing your exposure to regulatory fines, litigation, product recalls, and reputational damage.
What makes the situation even more complicated is that international locations often operate under different regulatory markets, supply chain requirements, and quality control procedures and standards. Add to this increasingly strengthened consumer protections around the globe, along with tighter insurance and tax enforcement.
Among this complex risk landscape, international product liability insurance is designed to protect goods manufacturers, distributors, and sellers from potential bodily injury or property damage caused by their products.
How Does International Product Liability Insurance Work?
Because of the complexity, insurance carriers carefully underwrite international product liability policies and consult directly with companies to ensure comprehensive coverage is in place for their crucial exposure areas.
Consequently, global liability insurance is highly customizable and flexible, depending on the company’s role, the product, and its specific risks. Carriers typically help companies assess these risks and then strategize how to minimize them, based on their geographic locations and products.
Bottom line: Through a wide range of coverage options, a global product liability insurance policy is tailored to protect each company against specific risk exposures, including:
- Product recalls (expenses and liability costs)
- A wide variety of bodily injury and property damage lawsuits, including a consumer’s humiliation, mental anguish, mental injury, and shock from physical harm.
Different Global Product Liability Coverage Examples
Overall, there are several ways for a company to obtain international product liability insurance:
- Controlled Master Program (CMP) – A single program covering all of the company’s risks and exposures.
- Non-Centralized Policies – Purchasing policies from locally-admitted carriers in each location where the company does business.
- Single Global Policy – A generalized global policy from non-local, non-admitted carriers, which can save money but can leave companies open to regulatory and tax risks.
How Much Does International Product Liability Insurance Cost?
HowMuch.net indicates that a good rule of thumb when calculating low-risk global product liability insurance premiums is to charge $0.25 for each $100 in revenue. For example, if your company sells $1 million worth of products per year, you’d pay about $2,500 for annual coverage.
However, it’s important to emphasize that what you pay depends on factors other than just annual revenue, including the type of products you sell, manufacture, or distribute, along with your unique combination of exposures.
What are Some Common International Product Liability Insurance Exclusions?
Because of their customizability, international product liability policies don’t typically contain across-the-board exclusions. However, there are several industries that carriers often shy away from:
- Pharmaceutical companies
- Manufacturers of tobacco products
- Herbal supplement manufacturers
- Nutraceutical companies
- Auto parts manufacturers
- Complete vehicle manufacturers
- Critical aircraft manufacturers
- Invasive medical products manufacturers
Who Should Purchase International Product Liability Insurance?
Specifically, though, any company that manufactures, distributes, imports, wholesales, or retails tangible products internationally—from automakers, technology firms, life sciences companies, and retailers to computer equipment manufacturers, textiles, and food preparation items—could benefit from global product liability insurance.
IHS Insurance Group is Your Source for International Product Liability Insurance
Whereas product liability coverage for small, local businesses typically falls under general liability insurance, the reality is those medium-to-large companies that operate internationally should purchase global product liability insurance.
Related: How Does a Commercial General Liability Policy Work?
Because of their complexity, you must deal with carriers who can carefully balance your exposures with the different regulations in the countries where you operate so that you remain protected and prepared.
The professional team at IHS Insurance Group is here to help! We have the expertise you need to maximize your coverage while minimizing your costs.
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