Do you need Product Liability Insurance (PLI)?
Yes, I do recommend you have it but I’d say you don’t need to have it before you list and launch your first or second product.
You are unlikely to get any insurance anyway if your business is very new, have no track record, never filed an annual return or have no experience working with factories in China.
How does Product Liability Insurance work?
Basically you can cover any product in a group of products or by product only under an insurance. Meaning if there is any issue with your end consumers the insurance will cover the damage. That is if you have done everything by the book. Meaning you have certifications, had an inspection, a letter of guarantee from your supplier of conform goods and everything went well during production. Thankfully I’ve never had to make use of my insurance so far and I pray I will never have to but just in case its good to have it. Especially if you sell in the US.
Who needs it?
I’d say anyone importing to the US needs it at some point. Be it low risk items or high risk items, it just is better to have as you never know what your customers may do with your product or if there’s any fault in manufacturing that you didn’t find out during inspection.
Who can apply for a Product Liability Insurance?
Basically anyone can apply for an insurance. After all the insurance companies want your money. BUT not everyone gets it. It really depends a lot on how long you have been in business, who are your suppliers (are they a 20 man factory or do they produce for Walmart), do they have certifications, do you yourself have experience buying from China etc. There are many factors that go into the insurers consideration to issue you a policy or not. Please note you need a company to apply for Product Liability Insurance. You cannot apply as a private individual.
Where can I get a Product Liability Insurance?
Here are some sites that broker insurances from the big Insurers (AXA, MSIG, BUPA,Generali, Globality etc.)
Send them an email with your introduction about your business and they’ll get back to you if they can help you. Mind you these companies are based in Hong Kong so you need to have a HK Ltd. company to apply.
To find insurers in your country you’ll need to check with your local insuring companies.
(Note: HSBC does not cover US businesses)
You need to understand while almost every insurance company will receive you with arms wide open for a life or health insurance it is actually NOT easy at all to get a product liability insurance.
You will be audited by either the insurance company or the broker and there will be extensive background research on you, your company, your products before you can actually get the insurance.
Like I say in nearly all of my posts, always work with reliable and experienced factories – always have certification available to meet country specific requirements (CE, ROHS, FDA etc).
When you apply for a PLI It is a minimum requirement that you have avilable certification.
I mean it’s only obvious that a insurer will only insure you if you have a quality product and not a product that falls apart or lights up in flames the moment you use it.
So you need to provide a lot of documents. Here are just some of the main documents needed:
- High Quality Product Photo of at least one item on each category
- Test report on at least one item on each category
- User Manual on at least one item on each category
- Warning Labels on at least one item on each category
- Completed and signed PLI application.
- Quality website with detailed information on your products
- Ideally you have a background in sourcing. If not, provide an action plan on how you source sustainable and quality items in China
I hope this helps as a general guideline. Please feel free to share or comment if you have any questions
All the best and happy sourcing,