If your business makes, supplies, or sells physical products then it’s worth looking into product liability insurance— even if you didn't manufacture the item yourself. 

With the right level of cover, product liability insurance can help protect your business if a product you've sold or supplied causes injury, illness, or property damage to a customer or member of the public. It could help cover legal costs and any compensation you may need to pay. It's usually sold alongside public liability insurance and sits on your overall business insurance policy. 

In this guide we'll set out what product liability insurance is, what it covers, which businesses should consider it, and how much cover you might need. 

This content for general information purposes only. It should not be taken as advice. 

How product liability insurance could protect your business 

A customer doesn't have to prove you were careless to make a claim against your business for a faulty or harmful product. Under the Consumer Protection Act 1987 (CPA), your small business could still be held liable for harm caused by a product you supplied — even if the fault was from your manufacturer, further up the supply chain. 

This is known as 'strict liability'. This means a customer only needs to show that the product was defective and that it caused them harm. They don't have to prove you were at fault. Since the rise of digital products, AI and online selling, the Law Commission is reviewing regulation around product liability, to ensure it keeps it up to date – so this area is still evolving. 

Saying that, product liability insurance could help to cover: 

• Legal defence costs if a claim is brought against your business 
• Compensation payments if you need to settle a claim 
• Costs linked to a product recall for faulty products in some instances, although this is not typically included as standard. 

Without the right cover in place, your small business might end up footing the costs — and legal fees could be costly. 

What does product liability insurance cover? 

Product liability insurance could help cover claims where a product you've made, sold, or supplied causes: 

• Injuries caused by product - for example a bike malfunctions while someone is riding it and causes them to fall and suffer an injury. 
• Harm caused by a fault in the design, manufacture, or labelling of a product - for example, you’ve sold a toy in your shop that injures a child. 
• Damage to someone's property – For example if cooker you’ve sold catches fire, causing property damage 
• Harm caused by a bad instructions or missing safety warnings – For example, a lawnmower you’ve sold causes injury to a customer while in use, despite them following the instructions given. The instructions missed vital safety warnings.

What standard product liability doesn’t normally cover: 

On a standard product liability policy there may be elements that are not included. This may include: 

• Product recalls - This is when a product line is found to be faulty and needs to be recalled by the supplier or manufacturer. 
• Efficacy cover -  This is where the product failed to do what it was supposed to do — for example, a safety device that didn't work as described in the instructions. 

This may be available as an add-on, but you should ask your broker to see what’s available to you. 

What product liability insurance typically excludes 

Product liability insurance generally doesn't cover: 

• Deliberate acts, misuse or fraud 
• Contract disputes over whether a product meets the specification originally agreed 
• Wear and tear, or damage caused by normal use over time is not included 
• Financial loss caused by products you knew were faulty before supplying them

Policies vary per insurer and limits and exclusions apply. Always check your own policy wording to see what is and isn’t included. 

Which businesses could be at risk from product claims? 

Any business whether big or small that makes, imports, distributes, or sells physical products could see a product liability claim come their way — this is not just manufacturers. If a product causes harm and the original manufacturer can't be identified (or is based outside the UK), you as the seller could end up responsible if a claim comes your way. 

Businesses that should consider product liability insurance include: 

Business type	Why product liability matters
Food businesses such as takeaways, restaurants, pubs and more	Contamination or reactions could cause customers harm
Manufacturers of physical goods or food manufacturers	Design or production faults could lead to injury claims
Importers selling products from abroad	You may be treated as the 'producer' if the original maker can't be found
Online retailers (Amazon, Etsy, eBay sellers)	Platforms like these may require you to have cover, and you could still face claims
Wholesalers and distributors	Supplying defective goods could leave you responsible for claims
Tradesmen who supply and fit products, such as bathroom fitters, electricians, plumbers	If a product you install causes damage, both suppliers and fitters could be liable
Makers of children's products, toys or clothing	Higher duty of care and stricter safety regulations
Beauty therapists, hairdressers and wellness businesses like holistic therapy	Reactions and skin conditions could lead to claims

This table is for general information only and is not advice. You should consider your own specific business activities and the products you sell or supply and your attitude to risk when it comes to taking out cover.

Should you consider product liability insurance if you sell online? 

Selling through an online platform doesn't remove your responsibility for the products you supply. Whether you're selling haircare products as a small shop on Amazon, selling furniture on Etsy, or retail products on your own website, you could still face a claim if a customer claims your product causes them harm. 

A few things worth knowing: 

• Amazon FBA sellers — if you use Amazon's Fulfilment by Amazon (FBA) service in the UK, Amazon may require you to hold public and product liability insurance with a minimum cover of £400,000, and to name Amazon as an additional insured on your policy. You should check the Amazon site for details. We don’t provide this type of cover at Bionic. 
• Etsy sellers —  Although Etsy doesn't require small businesses to have insurance, it does require you to follow all terms outlined in their Seller’s handbook. IIf you are selling products, it’s your responsibility to ensure they are safe for customers. Both handmade and retail products that come into contact with skin, are worn, or can be ingested (such as cosmetics, food, candles, children's clothing, jewellery) carry a product liability risk. Homemade products like lotions could be seen as riskier to insurers.  Read the UK Cosmetics Regulations for more information. 
• Dropshippers — if you're selling products to customers that you didn't make or manufacture yourself, you should check your policy still covers drop shipping. Not all product liability policies extend to drop shipping. 
• eBay and other platforms — Similarly to other selling platforms - the platform itself is not liable for your products. You could be held responsible as the seller.

If you run a small business from home and sell products— whether online or at markets — your home insurance policy is unlikely to cover business-related claims. A separate home-based insurance policy that includes product liability is worth considering. Always tell your home insurance provider if you are running a business at home. 

What coverage scope should a product-based businesses consider? 

Product liability insurance is usually sold together with public liability cover, and most policies offer between £1 million and £10 million of protection. The right amount depends on your business, your products, and your own contracts. 

When working out how much cover you need, it's worth thinking about: 

• Your contracts or agreements — Do you have any requirements in supplier contracts?  
• The potential size of a claim — This could include legal fees and compensation you may be required to pay 
• How many products you sell — How much stock you get in and whether you sell abroad as this may come with its own requirements. 

Is product liability insurance a legal requirement in the UK? 

Product liability insurance is not a legal requirement in the UK, but it’s worth considering if you sell, produce or even supply products to customers (including to other businesses). 

If your small business sells any products to the public — through a physical shop, online, at markets, or wholesale to retailers — product liability cover is worth considering, even if you didn't actually make the product yourself. 

If you haven’t already, it’s worth reading up on The Consumer Protection Act 1987, which is a law that simply says if you sell, supply or provide products your business could be held strictly liable for harm caused by a faulty product, regardless of whose fault it is. This could apply to anyone in the supply chain, including small businesses who act as sellers or importers. 

Real-world small business examples 

On forums like reddit or small businesses that sell products regularly share experiences on Reddit's r/smallbusiness and r/ecommerce about the product liability situations they didn't anticipate. Here are some scenarios, what they mean and how you can avoid running into them. 

Small business example 1: The shop owner who imports product 

"I resell products I source from a manufacturer in China. A customer says one of my products caused a burn. I didn't make it — why am I liable?" 

• Issue – Small business owners might assume they are not liable if they didn’t make the product themselves 
• The reality – Under the Consumer Protection Act 1987, if you imported the product and the original manufacturer can't easily be traced (or isn't based in the UK), you could be considered as the 'producer' and be held responsible. As the importer, you are in the supply chain. In this case, the right level of product liability insurance could help cover your legal costs and any compensation you might have to pay 

Small business example 2: The beauty seller on Etsy  

"I make handmade lip balms and sell them on Etsy. A customer says they had a reaction. I listed all the ingredients — am I still responsible?" 

• Issue – Sellers may assume that by listing ingredients that they may not be liable 
• The reality – Listing ingredients helps, but it may not fully protect you if a product causes harm. A customer could argue the product was defective without needing to prove you were negligent. In this case, the right level of product liability insurance could help with legal costs and may be worth considering even when you believe you've done everything right. 

What's the difference between product and public liability insurance for a small business? 

These two covers are usually sold together — but they help protect against different things: 

	Public liability insurance	Product liability insurance
What it may cover	Claims from injury or property damage caused as a result of your business activities or premises	Claims from injury or property damage caused by a product you made, sold, or even just supplied
Example	A customer slips on a wet floor in your shop	A customer is injured by a faulty product you sold them
Who it helps protect against	Members of the public, customers, and visitors	Anyone harmed by the product  — including anyone who didn't buy it directly
Legal basis	Negligence — you or your team did something that caused harm	Strict liability under the Consumer Protection Act 1987 — no proof of fault needed
Is it a legal requirement?	Not usually, but some contracts may require you to have it. Always check this yourself.	No, but often required by retailers, platforms, and buyers

Policies vary per insurer, and limits and exclusions apply. Always check your own policy schedule to see what cover is and isn't included. 

Many brokers can offer both types of cover on one policy, but the types of cover available to you depend on many factors including, but not limited to: your trade, business activities and what you actually need. 

If you sell products and interact with customers — in a shop, at events, or at customers' premises — you may want to consider a package insurance policy designed for your business type that includes both. At Bionic, we can help arrange this for you.

Get product liability insurance with Bionic 

At Bionic, our UK-based team can help you find cover that fits your small business. We offer cover for over 6,000 business types including shops, salons, takeaways and manufacturers and more.  

Whether you make products, sell them online, or supply them wholesale, we can help you compare business insurance quotes from trusted providers to find an insurance package that may include product liability.  

Get in touch with our UK-based brokers by starting a quote online. You only need a few details to get started. 

Product liability insurance FAQs 

Who is liable for damage caused by a defective product? 

Under the CPA, anyone who is involved in the supply chain could be held liable — including the manufacturer, importer, or retailer. So, if the original manufacturer can't be found, but you’ve sold the product as a retailer, you may be considered a producer. In these types of scenarios, it’s a good idea to consider product liability insurance if your small business sells or supplies physical products, not just the manufacturers thar make them. 

What's the difference between public liability and product liability? 

Public liability insurance covers claims for injury or damage caused by your business activities or premises — for example, a customer slipping in your shop. Product liability can help cover claims related to a product you've made, sold, or supplied that causes harm. They are commonly sold together on the same policy along with other essential covers like employers’ liability, which is a legal requirement if you have any workers. 

What details are required from me if someone makes a product liability claim? 

Your insurer may want information on the following:  

• The product name 
• Batch or serial number 
• The date of purchase or when it was supplied 
• The details of the defect or harm caused to the customer 
• Any relevant test records 
• Safety certificates or quality control documentation 
• Any communication you've had with the customer/client who is making the claim 

It's worth keeping product records of all the above — including information you have on product safety, suppliers or batches of products, just in-case you run into a product liability claim. 

Is product liability insurance tax deductible in the UK? 

Business insurance premiums are generally treated as an allowable business expense for tax purposes. This means you may be able to deduct the cost from your taxable profits. But you should speak to your own accountant to check this. 

Bionic does not provide financial or tax advice. Always speak to a qualified accountant or tax adviser for guidance specific to your situation. 

Does product liability insurance cover recalls? 

Product recall cover is sometimes offered as a separate add-on, rather than part of  standard cover for product liability insurance. If your business sells a lot of the same products and recall is a realistic possibility — like food manufacturers or retailers — it's worth asking your broker whether recall-related costs is available for you to consider.