Why do start-up companies often have difficulty obtaining product liability insurance? Starting up a business takes courage, bravery, skills, and a stable financial background to back its success. Not only will you be dealing with the product creation, but you’ll also be responsible for managing your employees.
I know it’s hard to start a business but you couldn’t be a billionaire if you just laze around now, would you? Although things may start smoothly for you there are some cases and instances that your business will face some challenges along the road to success.
This is true for most business that offers certain consumable products. No matter how compelling your product may be, as long as one customer out of 10 complains, it’s hard to get the others to trust your product a hundred percent continuously. On this note, it is suggested to have product liability insurance. What do you think is product liability insurance? Why do you need this kind of insurance? All of your questions will be tackled in this article, so stay tuned.
Product Liability Insurance
A Product Liability Insurance is a kind of insurance that gives you protection against claims regarding the damage that your product might have caused. Well, the primary purpose of having one is to cover future damages to your product. So, why do you need it anyway? Having Product Liability Insurance is best used by companies that create, supply, or selling directly to the public. Such businesses are prone to claims.
Whether the product is supposed to be effective, the products may cause damages and incur legal threats if mishandled. Some consumer and supplier requires having this insurance since a long trial may be costly and expensive.
Of course, it is a must to warrant the claims, but some claims are suspicious. These claims tend to tarnish the business name and market rate with the wrong information. Well, either way, claims may end up costing you a lot, especially the unwarranted ones. Your company has to take it very seriously since it threatens your product and company’s future.
Product Liability Claims
As a consumer, you would want a product that best satisfies your needs. Yet, you are buying that same product again and again because it is within or exceeds your expectation of usage. With that said, you couldn’t ask for a perfect product as much as the company who created it, would you? The same goes for companies; they want what’s best for the consumers that are within their benefit but can’t avoid defects with their product. Here are some of the most product liability claims covers.
Design defects
Sometimes people tend to criticize a product based on its appearance and practicality. Some may accuse your product of something dangerous, and you couldn’t avoid that. The product liability insurance could cover this case.
Manufacturing defects
One of the most common problems a liability insurance cover is the manufacturing defects of the product. Some claims may call your product something harmful for the body during the manufacturing process.
Labeling defects
Some people would think that there are adverse effects that your product may bring which are not indicated in the labeling. Many cases lead to legal settlements are because of mislabelling the product. The insurance may cover these legal proceedings, so you won’t have to worry about the settlement of the claims.
Obtaining Product Liability Insurance
Why do start-up companies often have difficulty obtaining product liability insurance? While most successful business companies almost have everything, they came from starting up like what you are aiming for right now. So what do you think is the problem?
Well, most insurance companies provide coverage to businesses under certain situations and qualifications. But, unfortunately, these qualifications are sometimes the root problem of why start-up businesses are having trouble obtaining insurance coverage. To get product liability insurance, read on what liability insurance is.
Reason #1. Market credibility
Yes, of course, you are new to the industry, which means that the product you are presenting to the market is unique and hasn’t been proven effective by the consumers.
Purchasing product liability insurance for start-up companies may be a hurdle because of the expensive premiums. A product liability insurance could cost an average of 0.25% of your annual revenue. Let’s say your revenue for this year is $500,000 so 0.25 percent of it is $1,250. This $1250 is the premium for the insurance. Some insurances offer low, medium, to high risks business categories covered up to a million dollars. If I were you, know how much liability insurance costs.
Reason #3. Regulations set by insurers
Some regulations by the insurer may include the approval of some government agencies associated with quality and consumer safety. Therefore, it is best to read on the policies and rules to be followed when applying for insurance.
Reason #4. No government approval
Since your business is consumable or can directly impact a consumer, you will have to gain the approval of specific government departments such as the FDA for any products associated with food and beverage.
Conclusion
So if you are wondering why do start-up companies often have difficulty obtaining product liability insurance? Then it is the four reasons stated above. To sum it all up, the product insurance liability may be a tough one to achieve. Purchasing insurance is out of the question, but you’ll be facing some troubles. Yet, it’ll all be worth it if you get your business insured. Of course, you have to gain approvals and permits before you can get one for your business too.
Do you want to read more about insurance articles? Read on what age to buy life insurance and how would the insurance industry use business intelligence. Thank you for reading! We hope you’ve learned something!