Product liability insurance isn't required by law in any state, but provides financial protection if you make, sell or distribute products.
Discover low-cost product liability coverage below.
Updated: October 13, 2025
Advertising & Editorial Disclosure
No state legally requires product liability insurance, unlike workers' compensation coverage or commercial auto insurance.
Food manufacturers, electronics makers, toy companies and private label retailers face the highest liability risks and could benefit most from this coverage.
You should also consider general liability, professional liability and commercial property insurance for full coverage.
Product liability insurance covers legal costs when customers claim your products caused injury or property damage. This coverage applies to manufacturers, distributors and retailers throughout the supply chain who can all face product liability claims.
Product liability coverage typically comes as part of your general liability policy and pays for legal defense costs, court settlements and medical expenses when product defect lawsuits arise.
Select your industry and state to get a customized quote.
Manufacturers face the highest liability risk in the supply chain. Product liability insurance provides financial protection so you can innovate and grow despite inevitable defects.
Defects happen regardless of quality control, from isolated bad units to entire production runs. One lawsuit from a defective product can cost hundreds of thousands of dollars.
Product liability laws in states including Washington, Texas and Wisconsin allow customers to sue manufacturers for design flaws, manufacturing errors and inadequate warnings. Customers only need to prove your product was defective and caused harm, holding manufacturers responsible even without negligence. This makes product liability coverage essential protection against financial ruin.
Product liability laws operate under two different standards. Under negligence, you're only liable if you did something wrong or were careless. Under strict liability, you can be held responsible even if you followed all proper procedures and weren't negligent.
Most states apply strict liability to product defects, meaning manufacturers and supply chain participants face legal exposure regardless of how careful they were.
Retailers and distributors need product liability insurance because customers can sue them even when they didn't manufacture the product. While retailers typically face lower liability risk than manufacturers, they can still be held responsible when the original manufacturer goes out of business or can't be legally reached.
Retailers also face liability if the product carries their brand name or if they provided design specifications to the manufacturer. Since retailers can't control manufacturer financial stability, legal jurisdiction or past branding decisions, product liability insurance protects against this unexpected exposure.
Service businesses have the lowest product liability risk but still need coverage when installing, repairing or modifying products. This includes HVAC technicians, appliance repair shops, auto mechanics, plumbers and contractors who install fixtures and equipment.
Service businesses can be held liable when their installation or modification work later causes harm, even when following proper procedures. Since customers often sue everyone involved when accidents happen, product liability insurance protects service businesses from costly legal defense and potential settlements.
Unlike workers' compensation insurance, which most states mandate for employers with employees, product liability coverage is optional under state law. But you may still need it to meet contract requirements from landlords, clients or business partners.
State regulations vary and change frequently. Verify current requirements with local authorities or insurance professionals.
While not legally required, certain businesses should strongly consider product liability insurance due to their higher risk exposure. Beyond product liability coverage, these businesses should also consider other types of business insurance for full coverage:
Food manufacturers and processors | Workers' compensation, general liability, commercial property | Food products pose contamination and allergen risks that can affect many consumers simultaneously. |
Electronics manufacturers | Workers' compensation, general liability, cyber liability | Electronic devices can overheat, catch fire or malfunction, creating safety hazards in homes and businesses. |
Toy and children's product makers | Workers' compensation, general liability, recall coverage | Children's products face strict safety regulations, and defects can cause serious injuries to vulnerable populations. |
Cosmetics and personal care companies | Workers' compensation, general liability, professional liability | Skin reactions, allergic responses and chemical burns can result from cosmetic and personal care products. |
Furniture manufacturers | Workers' compensation, general liability, commercial property | Furniture defects can cause injuries from collapse, sharp edges or toxic materials like lead paint. |
Retailers selling private label products | Workers' compensation, general liability, commercial property | Private label retailers become liable as manufacturers for products carrying their brand name. |
E-commerce sellers | Workers' compensation (if with employees), general liability, cyber liability | Online sellers can be sued for defective products even when sourcing from third-party suppliers. |
Contractors installing products | Workers' compensation, general liability, professional liability | Installation errors can make contractors liable for product-related injuries that occur after project completion. |
Disclaimer
Every business faces unique risks, so it's smart to talk with licensed insurance professionals about your specific coverage needs. They can help you find the right policy limits and combinations for your situation and location.
Product liability insurance isn't legally mandated, but high-risk businesses shouldn't skip coverage. Food manufacturers, electronics companies, toy makers and private label retailers face major costs from defective products. Most business owners pair product liability coverage with other business insurance types for complete protection.
We've answered common questions about product liability insurance coverage:
Product liability insurance covers injury or property damage from products you make, sell or distribute. General liability insurance provides broader coverage, including slip-and-fall accidents, advertising injury and non-product-related claims at your business location.
Retailers and distributors face lawsuits for product defects despite not manufacturing items. Retailers become liable when manufacturers become unreachable, go out of business or when products carry the retailer's brand name or meet their design specifications.
Most states apply strict liability to product defects, including Washington, Texas and Wisconsin. Under strict liability standards, businesses can be held responsible even when following proper procedures without negligence.
Service businesses need product liability coverage when installing, repairing or modifying products. HVAC technicians, plumbers and contractors can be held liable when their installation or modification work later causes harm, even when following proper procedures.
Design defects occur when products are inherently dangerous as designed. Manufacturing defects happen when individual products don't match their intended design. Marketing defects involve insufficient instructions or safety warnings about proper product use or known risks.
Product liability lawsuits cost hundreds of thousands of dollars in legal defense, settlements and medical expenses. These costs threaten business financial stability and long-term viability without proper insurance coverage.
E-commerce sellers need product liability coverage because customers can sue for defective products even when sourcing from third-party suppliers. Online sellers face liability exposure regardless of whether they manufacture products themselves or outsource production.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.
