Product liability insurance: cover for what you make, import and sell
Product liability insurance covers your legal liability when a product you make, import, sell, supply, install or repair injures someone or damages their property. It pays the compensation you are found liable for and the legal costs of defending the claim, up to the policy limit. In Australia it is usually sold together with public liability as a single "public and products liability" policy.
You don't have to manufacture anything to need it. Under the Australian Consumer Law, a business that imports goods from a maker with no office in Australia is treated as their manufacturer, and retailers and wholesalers can still be drawn into injury claims. What product liability does not do is pay to recall, repair or replace the faulty product itself; that is a separate cover.
By Better Rate Mate Editorial Team ยท Last reviewed
General advice only. It doesn't consider your circumstances. Read the PDS and TMD before you decide.
What public and products liability insurance covers
A products liability section responds when a product has left your hands and then causes harm. Typical examples:
- A phone charger you import overheats and starts a fire in a customer's home.
- A skincare product you make causes a customer a serious allergic reaction.
- Food you supply makes customers ill.
- A ladder you sell collapses and the buyer is injured.
- A tap you installed fails after you have left the job and floods the client's kitchen. For installers and trades, this "completed work" risk is usually covered under the products section rather than public liability.
Why importers and retailers need it too
The Australian Consumer Law, which the Australian Competition and Consumer Commission (ACCC) enforces, lets a consumer seek compensation from a manufacturer that supplied a product with a safety defect. The ACCC explains that a product has a safety defect if it doesn't meet the level of safety the public is generally entitled to expect. That liability does not depend on a contract with the injured person.
The law's definition of manufacturer reaches further than the factory. The ACCC's product safety guidance says a manufacturer includes a business that imports goods when the maker does not have an office in Australia. So an online seller or small retailer that sources directly from an overseas factory can be the manufacturer in law, with no Australian company standing between the customer and them.
Retailers and wholesalers of Australian-made or locally imported goods are less exposed under those provisions, but they can still be named in a negligence claim or in a claim where the maker is hard to pin down. Keeping clear records of who supplied every product is part of managing that risk.
| Your role | Exposure | Why |
|---|---|---|
| Manufacturer in Australia | High | Directly liable for safety defects under the Australian Consumer Law |
| Importer of goods from a maker with no Australian office | High | Treated as the manufacturer under the Australian Consumer Law |
| Wholesaler or retailer | Lower, but real | Can be joined in negligence claims, and needs supplier records to point to who made or imported the goods |
| Installer or repairer | Real, for your work | Claims arising from goods you fitted or repaired after the job is complete |
What product liability insurance does not cover
The most common gaps, and the cover that fills them where one exists. Injury to your own staff is a workers compensation matter, and paid advice or design work is covered, if at all, by professional indemnity.
| Not covered | Where to look |
|---|---|
| Recalling, repairing or replacing the faulty product itself | Product recall insurance (a separate policy) |
| The cost of redoing your own defective workmanship | Usually uninsured; some trade policies offer limited extensions |
| Financial loss from a product that simply doesn't work, with no injury or damage | Usually not insurable under liability cover; manage through contract terms |
| Injury to your own employees | Workers compensation |
| Advice or design you are paid for, as opposed to the product | Professional indemnity |
| Products exported to the United States or Canada | Often excluded or needing specific declaration and a higher premium |
| Liability you accept under a contract beyond what the law would impose | Negotiate the contract, or ask the insurer to note it |
Per occurrence and aggregate limits
Public liability limits are usually per occurrence: the limit applies to each separate event, however many events there are in the policy year. The products section is different. It is commonly subject to an aggregate limit, which is the most the insurer will pay for all products claims during the period of insurance combined.
That matters for a business whose one faulty batch could hurt many customers. A $10 million products aggregate is shared by every claim that year, so check whether defence costs are paid inside or on top of it, and whether a batch-clause treats all claims from one defect as a single occurrence.
Product safety recalls
The ACCC sets out two deadlines every product business should know. If a consumer product is associated with a serious injury, illness or death, the supplier must report it within 2 days of becoming aware of it. And a business that starts a voluntary recall must notify the responsible Commonwealth Minister within 2 days. Recalls can also be ordered by government. Product liability cover responds to the injury claims; the costs of getting the product back off shelves and out of homes sit with recall cover or with you.
How to compare product liability quotes
Insurers price products liability on what you sell, where it's sold and how much of it. Give every insurer the same description and figures:
- A precise description of your products. "Homewares" and "electrical homewares" are priced very differently.
- Annual turnover, split between goods you make, goods you import and goods you resell from Australian suppliers.
- Where you sell: online, in store, at markets, and any exports, especially to the United States or Canada.
- The limit you need (often set by a retailer, marketplace or distributor agreement) and whether it is aggregate.
- Whether the quote bundles public liability, and whether completed operations for installers are included.
- The excess, and whether it is higher for products claims.
General advice only. This information doesn't take into account your objectives, financial situation or needs. Consider whether the product is right for you and read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you decide. We don't compare every product in the market, and we may earn a commission if you take up a product through our links.
What to watch for
- Tell the insurer if you import. A proposal that describes you only as a retailer when you import directly can leave a claim exposed.
- Check the export territory. Many policies exclude products sold into the United States or Canada unless you declare them.
- Keep records of who supplied each product. Being able to point to the maker or importer is a retailer's first line of defence.
- Know the 2-day deadlines: reporting a serious injury linked to a product, and notifying a voluntary recall.
- Product liability won't pay for a recall. If one faulty batch could be expensive to pull back, ask about recall cover separately.
Common questions
What is the difference between public liability and product liability?
Public liability covers injury or property damage caused by your business activities, such as a customer slipping in your shop. Product liability covers injury or damage caused by a product you supplied after it has left your hands. They are usually sold together as public and products liability.
Is product liability insurance compulsory in Australia?
Not generally. No law requires most businesses to hold it, but retailers, marketplaces, distributors and landlords often make it a condition of stocking your products or leasing you space.
Do I need product liability insurance if I only resell other people's products?
Often, yes. A reseller can still be named in a negligence claim, and if you import directly from a maker with no office in Australia, the Australian Consumer Law treats you as the manufacturer. Many retailers and marketplaces also require suppliers to hold it.
Does product liability insurance cover recalls?
No. It covers injury and property damage claims caused by the product. The cost of recalling, repairing or replacing the product is covered, if at all, by separate product recall insurance.
How much does product liability insurance cost?
It depends on what you sell, how much you sell, whether you make or import it, where it's sold and the limit you choose. Riskier goods, such as electrical items, food, cosmetics and children's products, cost more to cover. Get quotes using the same product description, turnover split and limit so you're comparing like for like.
Do online sellers need product liability insurance?
If you import directly from overseas manufacturers, you may be legally treated as the manufacturer, which is exactly the risk product liability covers. Many online marketplaces and retail partners also require sellers to hold it.
General information only
This page explains how product liability insurance and the Australian Consumer Law generally work. It is not legal or insurance advice for your business. Read the Product Disclosure Statement before you buy, and get legal advice about your obligations as a manufacturer or importer.