What Is Product Liability Insurance (And Do You Actually Need It?)

You sell a product. Someone uses it. Something goes wrong. Now you’re facing a claim.

That’s the scenario product liability insurance exists to cover. And if your business sells, supplies, manufactures or imports any kind of physical product, this can be the most important part of your insurance - even if you’ve never heard of it.

Here’s the thing most business owners don’t realise: product liability insurance isn’t a separate policy you buy on its own. It’s a section within your public liability insurance policy. But for some businesses, it’s the section that does all the heavy lifting.

Key Takeaways:

• Product liability insurance is a section within your public liability policy - not a standalone product
• It covers claims arising from goods you sell, supply, manufacture or import
• If you import products without an Australian manufacturer, you become the deemed manufacturer under Australian consumer law
• Premiums vary wildly between insurers - we’ve seen gaps of over $1,700 for the same risk, and higher-risk categories can run well into five figures
• Some insurers exclude products cover for higher-risk occupations, so the wording matters as much as the price

What is product liability insurance?

Product liability insurance is the part of your public liability policy that covers claims arising from products you sell, supply, manufacture or import. If a product you’ve put into the market causes injury to someone or damages their property, this is the cover that responds.

It sits alongside the general liability section of your public liability policy. The general section covers your business activities - someone slipping in your shop, a visitor getting injured on your premises. The products section covers the goods themselves after they leave your hands.

For a service-based business, the general liability section does most of the work. But for a business that makes, sells or distributes physical products, the products liability section is where the real exposure sits.

We place public liability cover across dozens of industries, and the pattern is clear: businesses that deal in physical products may want to check whether their policy actually includes products cover - and what’s excluded.

How does product liability differ from public liability?

Public liability covers your business activities. Product liability covers the goods you put into the market. They sit in the same policy, but they respond to very different types of claims.

Here’s a simple way to think about it:

	Public Liability (General)	Product Liability
What triggers a claim	Your activities or premises	A product you sold, supplied or made
Example	Customer slips on a wet floor in your shop	Customer has an allergic reaction to something you sold
When the risk arises	While you’re doing the work	After the product leaves your hands
Who it covers	Third parties affected by your operations	Third parties affected by your products

A catering business, for example, has both exposures. If a guest trips over your extension cord at an event, that’s a general liability claim. If a guest gets food poisoning from your canapes, that’s a products liability claim.

The distinction matters because some policies treat them differently. And as we’ll get to shortly, some insurers will write the general section but exclude or restrict the products section - particularly for higher-risk occupations.

Who actually needs product liability insurance?

Any business that sells, supplies, manufactures, distributes or imports a physical product has a products liability exposure. That includes more businesses than you’d expect.

The obvious ones:

• Manufacturers - anything you make and sell, from skincare to steel components
• Food businesses - cafes, caterers, bakeries, food trucks, specialty importers
• Retailers - if you sell it, you can be liable for it
• Importers and distributors - you’re the Australian point of liability

But also the less obvious:

• Hospitality venues - every drink a bar serves is a product
• Pest controllers - the chemicals you apply are products
• Tradespeople who supply parts - a plumber who fits a valve, a mechanic who installs a reconditioned component, an electrician who supplies a fitting
• Home staging and furniture hire companies - hired furniture that fails structurally is a products claim
• Cleaning companies - if you apply your own branded chemicals, those are products

We’ve placed cover for all of these categories. The businesses that get caught out are the ones that don’t think of themselves as “product” businesses - but legally, they are.

What does product liability insurance actually cover?

Product liability insurance generally covers claims where a product you’ve sold, supplied or manufactured causes bodily injury or property damage to a third party. The specific scenarios include:

1. Defective products - a manufacturing flaw that causes the product to fail
2. Design defects - the product was designed in a way that makes it inherently unsafe
3. Inadequate warnings or instructions - the product didn’t come with proper safety information (the TGA regulates this heavily for therapeutic goods)
4. Contamination - particularly relevant for food, beverage and chemical products
5. Allergic reactions - a product ingredient triggers a reaction in a consumer

Here’s where it gets real. We placed cover for a small wellness product manufacturer - tinctures, blends, specialty formulations sold direct to consumer. For an insurer, this type of business raises immediate questions. What’s in the product? What health claims are being made? Is it TGA-regulated? Could it cause an adverse reaction?

We went to market and got four competitive quotes. The premiums ranged from $1,100 to $2,800 - a $1,700 gap for the exact same risk. Same business, same policy period, same cover. The difference was entirely down to which insurer had appetite for the category.

But the premium wasn’t even the most important part. Some of those quotes included the products liability extension. Others would have excluded it - meaning the business would’ve paid for a policy that didn’t actually cover the thing most likely to go wrong.

What happens if you import products into Australia?

If you import products and sell them in Australia without the original manufacturer having an Australian presence, you become the deemed manufacturer under Australian Consumer Law. That means the liability for a defective product doesn’t sit with the overseas factory - it sits with you.

We placed cover for a specialty food importer bringing in shelf-stable goods from overseas. Multiple insurers declined the risk outright. We had to go to underwriters with genuine appetite for import and distribution risk. The premium was notably higher than what a domestic food retailer doing the same turnover would pay - because the liability profile is fundamentally different.

This is one of the most misunderstood areas of product liability in Australia. Many importers assume their overseas supplier carries the risk. They don’t. The ACCC’s product safety guidance is clear on this point - once the product hits Australian shelves under your label (or without the original manufacturer’s local presence), the buck stops with you.

How much does product liability insurance cost?

Product liability insurance is bundled into your public liability policy - you don’t buy it separately. The premium you pay for your PL cover includes both the general liability and products liability sections.

That said, the cost varies significantly depending on your industry, turnover, product type and claims history. What we consistently see across our book is that premium spreads between insurers can be enormous.

Some real examples from our placements:

Business type	Premium range we saw	Spread
Wellness product manufacturer	$1,100 - $2,800	~$1,700
Standalone bar	$1,300 - $2,400	~$1,100

Those are the lower end of what we see. For higher-risk categories - importers, large-scale manufacturers, businesses with chemical or food exposure at volume - premiums can sit at $5,000, $10,000 and well beyond. The more complex the product, the higher the turnover, and the less insurer appetite there is in the market, the more the premium reflects that.

That spread exists because different insurers have different appetites for different product categories. One insurer might love hospitality but won’t touch chemicals. Another might be comfortable with food manufacturing but decline wellness products.

The point is: if you’re getting one quote from one insurer (or buying direct online), you genuinely have no idea whether you’re paying market rate. And more importantly, you have no idea whether the products section is actually included or has been carved out.

What’s the biggest risk most business owners miss?

The hidden exclusion. This is the thing we see more often than we’d like.

Some insurers will quote a public liability policy that looks completely normal on the surface - competitive premium, standard limits, clean certificate of currency. But buried in the endorsements or special conditions, there’s a products liability exclusion.

A business owner buying online ticks the box, pays the premium, and assumes they’re covered. They’re not. The general liability section is active, but the products section - the part that actually matters for their business - isn’t included.

We’ve seen this happen with wellness product makers, cleaning companies using proprietary chemicals, and food businesses with import exposure. The quote looks fine at first glance. You only catch the exclusion when you read the policy wording line by line - which is exactly what a broker does before binding.

When does a tradesperson need product liability?

If you’re a tradesperson who supplies parts as part of your work, you have a products liability exposure. That catches a lot of people off guard.

A mechanic who installs a reconditioned engine component. A plumber who fits a replacement valve. An electrician who supplies and installs a light fitting. In each case, you’re both a service provider and a product supplier in the eyes of the law.

If the part you supplied fails and causes property damage or injury, the claim gets split. The labour side falls under general public liability. The component itself falls under products liability. Getting the right policy wording - and confirming products cover is not excluded - is everything.

We’ve written about this in detail for the scaffolding industry, where the equipment you supply or hire out creates a distinct products exposure separate from your on-site work.

How do you make sure you’re actually covered?

Getting the right product liability cover comes down to three things:

1. Confirm the products section is included

It’s worth checking the policy schedule and endorsements rather than assuming products cover is automatically included. If you’re buying online without a broker, you’re relying on a platform to present the right product for your occupation - and that doesn’t always happen.

2. Disclose your products properly

Insurers price products liability based on what you tell them. If you manufacture wellness products but describe yourself as a “general retailer” on the application, your policy might not respond when it matters. Accurate disclosure leads to accurate cover.

3. Get multiple quotes

The premium spreads we see across our placements are too large to ignore. A $1,700 gap on the same risk is not unusual. Broking the risk across multiple insurers gives you both the best price and the best wording.

For any business insurance placement, the policy wording matters as much as the premium. With product liability specifically, it matters more.

Frequently Asked Questions

Is product liability insurance the same as public liability?

Not exactly. Product liability is a section within your public liability policy. Public liability covers your general business activities (like someone getting injured on your premises), while product liability specifically covers claims from goods you sell, supply or manufacture.

Do I need a separate product liability policy?

No. Product liability cover is included as part of your public liability insurance policy. You don’t buy it as a standalone product. However, you do need to confirm it’s actually included in your specific policy - some insurers exclude it for certain occupations.

How much does product liability insurance cost in Australia?

It depends on your industry, product type and turnover. Because it’s bundled into public liability, you’re paying a single premium for both. But premiums vary significantly between insurers - we’ve seen spreads of over $1,700 for the same business. Getting multiple quotes through a broker is the most reliable way to find the right price and cover.

What if I only sell other people’s products - do I still need product liability?

Potentially. As a retailer or distributor, you can still be held liable for a defective product you sell - even if you didn’t manufacture it. This is particularly true for imported goods where the original manufacturer doesn’t have an Australian presence. Under Australian Consumer Law, you may be treated as the deemed manufacturer.

What industries have the highest product liability risk?

Food and beverage manufacturers, wellness and supplement makers, chemical product suppliers (including pest controllers and cleaning companies), importers without local manufacturer backing, and any tradesperson who supplies and installs components as part of their work.

Getting the Right Cover

Product liability insurance isn’t complicated once you understand where it sits. It’s the products section within your public liability policy. But for businesses that sell, supply or manufacture physical products, it can be the most important part of that policy.

The risk isn’t just that a product causes harm. The risk is that you’re paying for a policy that doesn’t actually cover the thing most likely to go wrong. And the only way to know for certain is to read the wording.

Need help checking your product liability cover? Tank Insurance works with businesses across manufacturing, food, retail, hospitality and trades to help check that the products section of their policy provides the cover they expect. Reach out to our team at 02 9000 1155 or [email protected].

This is general information only. It does not take your objectives, financial situation, or needs into account. Always read the relevant Product Disclosure Statement (PDS) and seek independent advice before making insurance decisions.