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Do builders need product liability insurance?

With so many types of insurance out there, with different names and covering different events, it’s not easy to know what you need. One of the insurance products often mentioned is product liability insurance. This FAQ looks at what it is and if you need it.

In this video, part of our Public Liability FAQ series, we answer the question 'Do Builders need Product Liability insurance?’.

What is product liability insurance?

Product liability insurance is similar to public liability insurance. However, as the name suggests, it relates to products you make, supply, or install – e.g. a boiler, heating system, or electronic system.

This insurance is designed to protect you and your business if the product you have supplied or installed causes damage to property or harms someone.

Why may I need product liability insurance?

Product liability claims are common and can quickly add up to thousands or hundreds of thousands of pounds – e.g. if a faulty installation causes a flood or fire, or a client suffers physical injury which prevents them from working.

If you don’t have insurance, you might have to pay the damages and costs claimed (including legal fees). If you can’t pay, your business and assets may be at risk.

Does it matter how my business is set up?

You should consider product liability insurance whether you operate as a sole trader, a limited company or a partnership. The only difference it may make is to the cost of the insurance.

When calculating your premium, the insurer will typically consider several factors including:

  • how your business is set up
  • how many employees you have (if any)
  • where you operate
  • what sort of work you do
  • your previous claims history

How much cover should I have?

This will depend on the sort of work you do and the possible size of any claims against you. For example, if you work on small domestic projects, you may need less cover than if you work on large-scale sophisticated commercial projects.

Most insurance companies will provide cover of between £1 million and £5 million. If you’re in any doubt, speak to an insurance company which specialises in the construction industry.

Is it a legal requirement to have it?

Product liability insurance is not a legal requirement. However, you may find some larger clients insist you have it as a term of your contract. If you don’t, you will be in breach of contract which has potential legal and financial consequences.

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