files for a defective product next to a judge's gavel

Does General Liability Include Product Recall Insurance?

Your business invests tons of time and resources into crafting the perfect products. These products aim to meet a need in your customers’ lives, both helping them and boosting your business.

But, unfortunately, products don’t always live up to the hopes placed on them. Faulty products frequently hit the shelves. Sometimes, these items even threaten your customers’ safety.

When this happens, businesses face the challenge of recalling products. This process is expensive from start to finish, costing your business significant funds. These setbacks can severely damage a company.

That’s why product recall insurance is so critical to businesses. This insurance can cover the cost of:

  • Collecting your recalled items
  • Disposing of hazardous products
  • Public relations and crisis management

Many people believe that their general liability insurance offers this coverage. However, this assumption is false.

General liability insurance can protect you from several threats. However, you’ll need a policy that offers more extensive coverage if you face a product recall.

If that concerns you, don’t worry! We’ll explore the insurance coverage your business needs in the guide below.

What Does General Liability Insurance Cover?

People often believe that general liability insurance is their one-stop shop for insurance coverage. So long as they have this, they can handle any threat they encounter.

Most times, general liability insurance will protect your company. However, this protection does not extend to a product recall.

But, a general liability insurance policy includes product liability insurance. In some ways, this policy type handles similar concerns as a product recall insurance policy.

What are the differences between these two? We’ll explore this in greater depth in the following sections.

Product Liability Insurance

Any business that sells, manufactures, or distributes products benefits from this insurance. Let’s say somebody buys your leading product and takes it home. Once in their possession, this product allegedly hurts the customer or damages their property.

When this happens, product liability insurance provides support for your business. This coverage can pay for:

  • Legal fees
  • Judgment
  • Settlements

Product liability insurance also plays a pivotal role in construction and contracting businesses. This policy offers monetary protection if a client sues over injuries or damage to their property related to the construction company’s work.

Product liability insurance is helpful for all businesses, even if they have done nothing wrong. However, it does not cover the expenses needed to recall a product.

Product Recall Insurance

Product recall insurance differs from product liability by specifically covering recall expenses. As mentioned before, these costs include collecting and disposing of faulty products. It can also manage your public relations expenses.

There are several other expenses involved with a recall as well. For example, you’ll have to run tests to determine what caused the defect. Then, you’ll examine your products to discover if the problem only affects some batches or all of your products.

Next, you’ll have to pay for ways to inform customers about the product defect. This notification also includes informing consumer protection groups about the threats.

Companies must also track all defective products that customers return. Otherwise, you risk them becoming unaccounted for.

Finally, you’ll need a plan to rebuild your reputation. People remember the inconvenience of a product recall. It usually takes some work to get them to forgive you.

Various factors could make these costs astronomical for your business. That’s why you should always purchase a product recall insurance policy if these threats apply to your business.

Reasons to Purchase Product Recall Insurance

Some businesses skimp on product recall insurance, thinking that a recall would never happen to them. We highly recommend avoiding that line of thought.

Even if you think a product recall is unlikely, there’s always the chance it could happen to you. Product recalls happen almost daily. In fact, the FDA found that close to 8,000 recalls happened annually from 2013 to 2020.

Sometimes those recalls are choices made by companies. They’ve discovered a product may be defective and try to protect their customers.

Other times, however, these recalls happen because of the US federal government. Each year, government oversight of businesses and their products becomes more stringent. It continues to implement robust product safety protocols.

Congress has also passed laws in recent years that demand more from businesses. One example of such a law is the Consumer Product Safety Improvement Act of 2008.

Finally, consider the costs of a product recall. A product recall can bankrupt a small business and severely damage larger companies. Do you want to be responsible for those expenses if you need a recall?

How to Find Product Recall Insurance

As you can see, product recall insurance can play a decisive role in helping you afford a product recall. The question is, how can you find a policy that works for your business?

We recommend you start by asking your general liability insurance provider about their coverage. Do they offer a product recall policy that suits your business?

If so, this is often the best route to pursue. Getting your product recall insurance policy from this provider keeps things simple. You don’t have to worry about conflating policies or having providers fight about who should cover issues.

This option often saves money, too. Many insurance companies offer lower monthly premiums if you bundle coverage packages with them.

However, you may find that your general insurance provider doesn’t offer product recall coverage. If not, search for another provider who can work well with your general liability insurance company.

Find the Best Insurance Provider Today

As you can see, general liability insurance will not cover your product recall expenses. Instead, you’ll have to find a separate product recall insurance policy to cover these potential expenses.

However, general liability insurance provides several benefits for your business, including product liability coverage. If you don’t have this coverage yet, it’s best to start looking for it.

If that describes you, consider choosing our policies! We offer many kinds of insurance policies to businesses throughout New Jersey. Contact us today to request a quote for your coverage.