🛡️ The Difference Between Product Liability and General Liability Insurance

Running a business means dealing with risks every single day. Some are small—like a shipment delay—while others can turn into serious legal problems. That’s where insurance steps in to save the day. Two of the most commonly confused types of business insurance are Product Liability and General Liability Insurance. They might sound the same at first, but they actually cover very different things.

Let’s break down what each one does, who needs it, and why both matter more than most people realize.

🔍 What General Liability Insurance Actually Covers

If your business has a physical space or deals directly with clients, you probably already know a bit about General Liability Insurance (also called “GLI”). It’s basically the safety net that protects your company from everyday accidents that could cost a fortune.

🧾 Common Things It Covers:

• Injuries that happen to customers on your property
• Damage your employees might cause to someone else’s property
• Legal fees if someone decides to sue
• Advertising mistakes like copyright issues or defamation claims

Here’s a quick example: A customer walks into your office, trips over a power cord, and ends up with a broken arm. If they file a claim against your business, your general liability policy steps in to cover their medical costs and any related legal expenses.

Without that coverage? You’d be paying those bills out of pocket—and they can easily run into tens of thousands of dollars.

🏭 What Product Liability Insurance Is All About

Now, Product Liability Insurance is a little different. It’s for businesses that sell, make, or distribute physical products. If something you sold causes harm to a person or damages their property, this is the insurance that protects you.

🧾 It Typically Covers:

• Manufacturing defects that happen during production
• Design problems that make the product unsafe
• Failure to warn, meaning missing instructions or safety labels
• Product-related injuries or property damage

Example time: Let’s say you manufacture electric blenders. One model overheats and injures a customer’s hand. That’s not something your general liability policy would handle—it falls under product liability. This policy covers the medical and legal costs that come from that defective item.

Even if you didn’t make the product yourself—say you just sell it—you could still be legally responsible. That’s why so many eCommerce stores, retailers, and wholesalers carry product liability insurance.

⚖️ Product Liability vs. General Liability: What’s the Difference?

Both types of insurance protect your business from being sued, but they deal with different causes of loss. Here’s an easy way to think about it:

In short: General Liability covers what happens around your business, while Product Liability covers what happens because of your product.

💼 Do You Need Both?

In many cases, yes. Most businesses benefit from having both policies—because one covers what the other doesn’t.

If you only offer services (like consulting, design, or marketing), a general liability plan might be enough. But if your company makes or sells anything tangible, even online, you need product liability coverage too.

For instance, if you run an online candle store, a customer could get burned from one of your candles. That’s a product-related issue. On the other hand, if someone visits your studio and slips on a wet floor, that’s general liability territory.

🧭 Which Businesses Need Product Liability the Most?

Some industries are more exposed to product-related claims than others. If your business falls under any of these, product liability isn’t optional—it’s vital.

• Manufacturers & Wholesalers – Especially those producing physical goods.
• Retail Stores & Online Sellers – If your name’s on the label, you’re responsible.
• Food & Beverage Companies – Contaminated or mislabeled items can trigger lawsuits.
• Beauty & Health Brands – Anything that touches skin or hair carries higher risk.
• Electronics Makers – Fires, burns, or shock hazards can lead to big claims.

Even small mistakes—a missing warning label, a small defect—can lead to lawsuits worth thousands. Product liability keeps your business from crumbling when something goes wrong.

🧾 Real Example #1: When Product Liability Saved a Business

A small organic lotion company once sold a batch of creams that caused rashes for several customers. Within weeks, they faced multiple legal claims totaling over $200,000.

Their Product Liability Insurance paid for all the legal costs, settlements, and refunds. Without it, the owner said, the company would have gone bankrupt within months.

🏢 Real Example #2: When General Liability Saved a Company

A digital marketing agency hosted a client meeting, and a visitor tripped on loose carpet near the entrance. The injured client sued for medical expenses and time off work.

The company’s General Liability policy covered the claim, including the lawyer fees and settlement. That one policy literally saved them from closing their doors.

💰 How Much Does Each Cost?

Insurance prices depend on things like your business size, location, revenue, and claims history, but here’s a ballpark idea:

• General Liability Insurance: About $450–$1,000 per year for small businesses
• Product Liability Insurance: Roughly $800–$3,000 per year, depending on risk level

You can usually bundle both policies together under a Business Owner’s Policy (BOP), which saves around 10–20% on premiums.

🧩 Why Having Both Matters in 2025

With stricter consumer protection laws and more online sales than ever, liability risks are growing fast. Customers are more likely to sue over defective or unsafe products, and courts are taking these cases seriously.

If you don’t have both coverages, one small incident could drain your savings or even shut down your business.

Having General Liability and Product Liability Insurance together creates a safety cushion—financially and legally—so you can focus on growth instead of panic.

🧠 Final Thoughts

At the end of the day, knowing the difference between product liability and general liability insurance can literally decide whether your business survives a crisis.

General liability protects you from everyday accidents; product liability protects you from what your business makes or sells. They work hand in hand—two shields covering different angles.

If you’re not sure which you need (or how much), it’s worth getting advice from a trusted business insurance agent. A small premium today can prevent a major financial disaster tomorrow.

Protect your work, your customers, and your reputation—because in business, it’s not a matter of if something goes wrong, but when.

📞 Contact InsureDirect

InsureDirect.com
Corporate Home Office
618 South Broad Street
Lansdale, Pennsylvania 19446
Email: contact@insuredirect.com
Phone: (800) 807-0762 ext. 602

Keep your home safe and secure with complete protection from InsureDirect—because your home deserves nothing less than the best.