Product liability insurance isn't required by law in any state but covers legal costs and settlements if you make, sell or distribute products.
Get matched to top product liability insurance companies for your business below.
Updated: March 19, 2026
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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 carry the highest liability risks and need this coverage most.
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; all can be sued for product liability claims.
Product liability coverage 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 have more liability risk than other businesses in the supply chain. Product liability insurance covers legal costs and settlements, letting you focus on innovation and growth.
Defects happen despite quality control measures, from single bad units to entire production runs. A single lawsuit over a defective product costs hundreds of thousands of dollars in legal fees and settlements.
Product liability laws in states like Washington, Texas and Wisconsin let customers sue manufacturers for design flaws, manufacturing errors and inadequate warnings. Customers prove only that your product was defective and caused harm. You're liable even without negligence.
Retailers and distributors need product liability insurance because customers sue them even when they didn't manufacture the product. While most retailers carry lower liability risk than manufacturers, they're still held responsible when the original manufacturer goes out of business or isn't within legal jurisdiction.
Retailers are also liable if the product carries their brand name or if they provided design specifications to the manufacturer. Retailers don't control the manufacturer's financial stability, legal jurisdiction or past branding decisions. Product liability insurance covers legal costs from 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 are liable when their installation or modification work causes harm, even after following proper procedures. Customers often sue everyone involved when accidents happen. Product liability insurance covers legal defense costs and settlements.
Product liability laws operate under two standards. Under negligence, you're liable only if you did something wrong or acted carelessly. Under strict liability, you're responsible even after following all proper procedures.
Most states apply strict liability to product defects. Manufacturers and supply chain participants have legal exposure regardless of how careful they were.
Unlike workers' compensation insurance, which most states require for employers with employees, product liability coverage is optional under state law. You might 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 licensed insurance agents.
Though not legally required, certain businesses with higher risk should carry product liability insurance. Beyond product liability, consider these other business insurance types for full coverage:
Food manufacturers and processors | Workers' compensation, general liability, commercial property | Contamination and allergens in food products affect multiple consumers at once, creating widespread liability exposure. |
Electronics manufacturers | Workers' compensation, general liability, cyber liability | Overheating, fires and malfunctions in electronic devices cause property damage and injuries in homes and businesses. |
Toy and children's product makers | Workers' compensation, general liability, recall coverage | Defects in children's products cause choking, poisoning and other injuries. Safety regulations are strict, and recalls are common. |
Cosmetics and personal care companies | Workers' compensation, general liability, professional liability | Cosmetics and personal care products cause skin reactions, allergic responses and chemical burns. |
Furniture manufacturers | Workers' compensation, general liability, commercial property | Collapsing furniture, sharp edges and toxic materials like lead paint cause injuries and lawsuits. |
Retailers selling private label products | Workers' compensation, general liability, commercial property | Private label retailers carry manufacturer liability for products with their brand name, even when sourcing from suppliers. |
E-commerce sellers | Workers' compensation (if with employees), general liability, cyber liability | Online sellers get sued for defective products, even when third-party suppliers manufacture them. |
Contractors installing products | Workers' compensation, general liability, professional liability | Contractors are liable for injuries from installation errors, even months or years after finishing the job. |
Talk with a licensed insurance agent about your coverage needs. Agents help you find the right policy limits and coverage combinations for your business 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 pay major costs from defective products. Most business owners pair product liability coverage with other business insurance types for complete financial protection.
We've answered common questions about product liability insurance coverage:
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 are held liable when their installation or modification work causes harm, even when following proper procedures.
E-commerce sellers need product liability coverage because customers sue for defective products even when sourcing from third-party suppliers. Online sellers have liability exposure regardless of whether they manufacture products themselves or outsource production.
About Blest Papio
Blest Papio is a Content Producer at MoneyGeek specializing in small business insurance. With five years of experience in insurance and finance writing and hands-on perspective as a former business counselor, he understands the risks that come with running a business and what it takes to protect against them.
Blest focuses on commercial auto, cyber, property and specialty business insurance. He digs deep into policy details, regulations and provider offerings so businesses can find the coverage they need and avoid financial fallout. His goal is to translate technical insurance language and insurer offerings into guides you can act on.
Whether you're insuring company vehicles, managing cyber liability or protecting your commercial property, Blest aims to guide you through your risks to help you find coverage you truly need, not sell you a policy.
