Understanding Product Liability for Small Businesses
Running a small business that manufactures, sells, or distributes products in Australia comes with certain legal responsibilities. Even with strict quality control, things can go wrong — a product might malfunction, cause injury, or damage property. Without proper cover, you could face expensive lawsuits, reputational damage, or even business closure.
That’s where product liability insurance for small businesses becomes essential. It’s a safeguard that helps protect your business from financial fallout in the event of a claim, covering legal costs, compensation, and more.
What Is Product Liability Insurance?
Product liability insurance provides protection when a product your business sells, supplies, or manufactures causes injury, illness, or property damage. Whether you operate from a retail shop, warehouse, or online store, this form of business insurance policy can shield you from unexpected claims.
Common Scenarios Where You May Be Liable:
- A customer suffers a skin reaction from a cosmetic you sold
- A defective appliance causes a kitchen fire in a customer’s home
- A toy malfunctions and causes injury to a child
Â
Even if you didn’t manufacture the product, you could still be held liable under Australian Consumer Law if you branded or imported it.
Who Needs Product Liability Insurance?
While it’s relevant for businesses of all sizes, product liability insurance is particularly critical for small businesses that may lack the financial buffer to absorb costly claims. You may need to cover if you:
- Manufacture or assemble products
- Sell or distribute items under your label
- Import goods from overseas
- Repair or repackage products
Â
Sole traders, e-commerce owners, tradies selling products as part of their service, and food businesses all fall under the high-risk category.
What Does Product Liability Insurance Cover?
Product liability is usually part of public and product liability insurance, which offers broader protection against third-party claims.
Typically covered risks include:
- Personal Injury – If a customer is harmed due to your product
- Property Damage – If your product causes loss or damage
- Legal Costs – Defence expenses and court costs
- Compensation Payouts – If you’re found legally liable
Â
Example: If your business sells handmade candles and one causes a fire in a customer’s home, product liability insurance could help cover the damages and legal expenses.
Why Small Businesses Can’t Afford to Go Without Cover
Lawsuits related to product issues can easily reach five or six figures — a potentially devastating blow for a small enterprise. Many suppliers and retailers won’t even do business with you unless you carry valid product liability coverage.
Having the right business insurance policy not only offers financial protection but also strengthens your credibility and compliance standing.
Choosing the Right Policy for Your Business
Every business is different, so your product liability insurance should reflect your industry, risk exposure, and the types of products you handle. That’s why it’s wise to work with an experienced Client Manager at Atlantic Insurance who understands your sector and can offer tailored advice.
Our team can help you:
- Compare policies from reputable insurers
- Understand the fine print and policy limits
- Bundle product liability with other essential covers
- Ensure your coverage complies with Australian Consumer Law
Â
Speak to an Expert Today
Don’t leave your business exposed to unnecessary risk. With the right product liability insurance for small business, you’ll gain peace of mind knowing you’re covered if the unexpected happens.
Get a Quote. Speak to a Trusted Broker at Atlantic. Insurance.
Any information contained on this page of the website is general advice only and has been prepared without taking into account your objectives, financial situation or needs. You should consider these, having regard to the appropriateness of this advice and the relevant Product Disclosure Statement (‘PDS’), Target Market Determination (‘TMD’) and Financial Services Guide (‘FSG’), which will be provided following any formal recommendation to you.