While other industries may consider insurance a “nice to have”, it’s utterly essential in construction and demolition. In this high-risk field, it’s not a question of if something will go wrong, but how prepared you will be when it does. Product liability insurance is one of the best ways to reduce risk and protect your operations. Unfortunately, it also costs money.
But is this cost high enough to justify the risk of remaining underinsured? How much is product liability insurance – and is there anything you can do to reduce those expenses?
What is Product Liability Insurance?
Product liability insurance is designed to protect you from costs incurred by issues with your product that have resulted in harm or damage. This can mean a tangible product that you have manufactured or supplied, or potentially a structure that you have built/altered. Insurance might help cover legal fees, for instance, if a client sues.
One of the most famous examples of a product liability case (and that many of you will already be familiar with) is the McDonald’s Hot Coffee Lawsuit in the 1990s, where a woman complained about burns sustained as a result of a drink she had ordered. The product in this case was the coffee, and she was suing because of the physical harm it caused her. While the details will differ in your industry, the basic principle remains the same.
Do You Need Product Liability Insurance?
Unlike many other forms of insurance, a product liability policy is not required under Australian law. However, you should still have one, especially if your company offers tangible products. By absorbing some of the expenses that would otherwise come out of pocket, insurance reduces your financial losses during an emergency. In the long run, this can mean the difference between a profitable firm, and bankruptcy.
Having sufficient insurance also positions your firm as safe and trustworthy. It signals that you are going out of your way to protect yourself, your employees, and your clients. This improves your chances of obtaining new contracts, maintaining existing relationships, and ensuring long-term success.
Factors That Influence Costs
It’s difficult to provide exact pricing for any kind of insurance, because the reality is that every insurance firm charges each client differently. However, there are a few common factors they use to determine how much product liability insurance will cost:
1. Your Risk Profile
Some businesses carry a higher inherent risk than others. The types of jobs you perform, products you offer, and specific dangers you face will all impact this.
2. Business Size and Turnover
The more staff you employ, equipment you own, and overheads you must account for, the higher your expenses will be during an emergency. Insurers will take this into account when providing a quote, as you are likely to cost them more than a smaller company.
3. Claims History
A long history of previous claims, especially across different insurance providers, often signals a problem. Insurers will extrapolate from this that you’re more likely to make a claim with them. Because of this, they may charge more or refuse to cover you at all.
4. Coverage Limits
As with all policies, you get what you pay for. Fewer exclusions and higher coverage limits will almost always result in a higher premium.
5. Location
Your location can also make a difference. This is due to factors such as local regulatory requirements and weather conditions, which can impact your risk level.
How to Keep Product Liability Insurance Costs Low
Work with a Specialist Broker
To get the best deal possible, you must work with a broker who understands your industry. They can provide tailored advice and negotiate a contract that suits your needs perfectly.
Bundle Your Policies
Product liability insurance is often bundled with another policy called “Public liability”. The latter is required by law in many Australian states, so you will likely need this coverage anyway. By packaging multiple types of insurance together like this, you can often save a significant amount on premiums.
Maintain a Clean Claims Record
The fewer claims you’ve made in the past, the better. It helps insurers feel comfortable by lowering the risk they are agreeing to accept. Try to only make a claim when absolutely necessary, or when you’re sure you have a rock-solid case.
Choose the Right Policy
In general, it’s always better to be overinsured than underinsured – but not when you can’t afford it. Check your contract carefully and ensure it actually suits your needs. If you notice excessive coverage limits, or other factors that could be increasing costs without providing tangible value, consider adjusting them and asking for a revised quote.
Annual Reviews
As your company changes and grows, your insurance policies will also need to. Make it a habit to re-assess all coverage at least once per year, and adjust as needed.
Insure Your Business and Save Money
Insurance is ultimately always less expensive than legal costs. It’s an essential way of protecting your business’ financial future. But if you’re concerned about the expenses involved, there are ways to reduce them. Bundle policies where possible, engage with a skilled broker, and only obtain the coverage you need. These measures will help you maintain the protection you need and cover the costs incurred by an emergency, without putting yourself into dire financial straits.
Got no idea which policies you need, or how to get started? That’s okay, we’re here to help. Read our ultimate guide and learn everything you could ever need to know.
FAQs
Public liability insurance covers personal injury or property damage caused by your business activities, while product liability insurance is focused on harm caused as a result of your products (aka physical goods you provide or install).
Product liability insurance is not mandatory for demolition firms in Australia. However, it’s still a good idea to obtain coverage due to the financial protection on offer.
Just because one insurer turned you down, that does not mean coverage is impossible. A skilled broker can help you find a provider who can and will meet your needs.
In Australia, product liability insurance costs are influenced by a number of factors. It all comes down to the level of risk you are asking the insurer to accept. The higher your risk level, the more you will pay.
If your firm is smaller, then you will likely pay less than a larger company. This is because you are likely to require less money to cover costs during an emergency.
Many firms bundle public and product liability together, since the former is legally required anyway. Generally speaking, this will cost slightly more than either policy individually, but slightly less than obtaining both separately.