What's the difference between general liability and product liability insurance for manufacturers?

Product liability is actually a component of general liability insurance, not a separate policy. Your general liability policy includes products-completed operations coverage, which protects you if a product you manufactured causes injury or property damage after it leaves your facility. Some high-risk manufacturers may need a standalone product liability policy with higher limits, but for most businesses, product liability is built into the general liability coverage.

Do I need general liability insurance if I only sell to other businesses, not consumers?

Absolutely. Business-to-business (B2B) manufacturers face significant liability exposure. If your product causes injury or property damage to another business, their losses can be substantial—think damaged equipment, facility downtime, or injuries to their employees or customers. In fact, commercial claims often involve higher dollar amounts than consumer claims. Plus, your B2B contracts almost certainly require proof of general liability coverage before they'll do business with you.

Will my general liability insurance cover a product recall?

Standard general liability policies typically don't cover the costs of recalling defective products—the expenses of identifying, retrieving, and replacing or repairing the products themselves. However, GL insurance does cover third-party claims for injuries or damage caused by those defective products. If you're concerned about recall costs, you'll need a separate product recall insurance policy, which is particularly important for food manufacturers and businesses making safety-critical components.

How quickly can I get a certificate of insurance after purchasing a policy?

Once your general liability policy is active, your insurance broker can typically issue a certificate of insurance within 24 hours, often within a few hours. The certificate shows your coverage limits, effective dates, and can name specific entities as additional insureds if required by your contracts. Many brokers can email certificates immediately, which is crucial when you need to meet contract deadlines or bid requirements.

Does general liability cover me if my product works as designed but is misused by the customer?

It depends on whether you provided adequate warnings and instructions. General liability covers design defects, manufacturing defects, and failure to warn. If your product is inherently dangerous when misused and you didn't provide sufficient warnings about those dangers, you could still be liable. However, if you provided clear warnings and instructions, and the customer ignored them, you may have a strong defense—but your general liability policy will still cover your legal defense costs either way.

Should I get occurrence-based or claims-made general liability coverage?

For manufacturing, occurrence-based coverage is almost always the better choice. Occurrence policies cover incidents that happen during the policy period, regardless of when the claim is filed—crucial for manufacturers since product liability claims can surface years after a product leaves your facility. Claims-made policies only cover claims filed during the policy period, which can leave gaps if you switch insurers or let coverage lapse. Most general liability policies for manufacturers are occurrence-based by default.

General Liability Insurance for Manufacturing

If you run a manufacturing operation, you already know that things can go wrong in a hundred different ways. A visitor slips on your factory floor. A defective product injures a customer. Your equipment damages a client's property during installation. Each of these scenarios could cost you hundreds of thousands—or even millions—of dollars without the right protection. That's where general liability insurance comes in.

General liability (GL) insurance is the foundation of your manufacturing business's risk management strategy. It covers third-party bodily injury and property damage claims—the kind that can shut down an uninsured business overnight. With the average product liability claim in manufacturing exceeding $7 million, this isn't coverage you can afford to skip or skimp on.

Why Manufacturing Businesses Need General Liability Insurance

Manufacturing carries inherent risks that most other industries don't face. You're working with heavy machinery, hazardous materials, and complex production processes. You're creating products that end up in customers' hands. And you're often hosting vendors, clients, and inspectors on your premises.

Here's what keeps manufacturing business owners up at night: over 37,900 fires occur at industrial and manufacturing properties each year, causing $1.2 billion in direct property damage. Manufacturing also accounts for 15% of all nonfatal workplace injuries. While workers' comp covers your employees, general liability protects you when visitors, contractors, or customers get hurt on your property.

But the biggest exposure for manufacturers is product liability. If a defective product causes injury or property damage after it leaves your facility, you're potentially liable. A faulty component in an automobile part, a structural failure in building materials, or contamination in food processing—these claims can reach into the millions. General liability insurance covers legal defense costs, settlements, and judgments when you're sued for bodily injury or property damage caused by your products or operations.

Beyond the financial protection, you'll need general liability for practical business reasons. Most vendors won't let you through their doors without a certificate of insurance. Construction projects require it before you can bid. Lease agreements demand it. Your business literally can't function in the modern commercial landscape without general liability coverage.

Understanding Coverage Limits: Why $1 Million Might Not Be Enough

The standard general liability policy structure is $1 million per occurrence with a $2 million aggregate limit. Let's break down what that means in plain English.

The per-occurrence limit is the maximum your insurance will pay for any single incident or claim. If a visitor falls and breaks their hip on your factory floor, your policy will cover up to $1 million in medical bills, lost wages, pain and suffering, and legal costs. The aggregate limit is the total maximum your policy will pay for all claims during the policy year, typically 12 months. Once you hit $2 million in total claims—even if it's from multiple separate incidents—you've exhausted your coverage for the year.

Here's the problem: 87% of manufacturers choose this $1 million/$2 million structure, but it's often inadequate for the risks you actually face. When the average product liability claim is over $7 million and business interruption claims average $2.38 million, a $1 million limit can leave you dangerously exposed.

That's why many manufacturing operations are moving to $2 million per occurrence and $4 million aggregate limits. Risk-heavy sectors like industrial manufacturing often go even further, purchasing commercial umbrella policies that stack additional coverage on top of the primary general liability policy. Many carriers will provide up to $2 million in primary coverage, then add an umbrella to reach $5 million or more in total protection.

Before you decide on coverage limits, consider these factors: What's your annual revenue? What products do you manufacture? What's your claims history? Do your contracts require specific minimum limits? A $5 million product recall or defect claim could bankrupt a business with only $1 million in coverage. Additional layers of $1 million coverage start around $2,500 per million, which is a small price to pay compared to the potential exposure.

What General Liability Actually Covers for Manufacturing Operations

General liability insurance for manufacturing covers three main categories of risk: bodily injury, property damage, and personal and advertising injury. Let's walk through what each one means for your operation.

Bodily injury coverage protects you when someone who isn't your employee gets hurt because of your business operations. A delivery driver trips over equipment in your warehouse. A client touring your facility gets burned by hot machinery. A passerby is injured when your forklift driver accidentally backs into the street. Your general liability policy covers their medical expenses, lost income, and legal costs if they sue. It also covers your legal defense even if the lawsuit is frivolous—and those defense costs alone can easily reach six figures.

Property damage coverage handles situations where your business operations damage someone else's property. Your installation crew damages a client's building while setting up your equipment. A product you manufactured causes a fire at a customer's warehouse. Your delivery truck backs into a retail storefront. General liability steps in to pay for repairs, replacement, or legal costs if the property owner sues.

Product liability is a critical component of general liability for manufacturers. If a product you made causes injury or property damage after it leaves your facility, you're covered. This includes design defects, manufacturing defects, and failure to warn about dangers. The key phrase here is "products-completed operations"—it extends coverage beyond your premises to wherever your products end up.

Personal and advertising injury covers things like libel, slander, copyright infringement, or invasion of privacy claims arising from your business activities. While less common in manufacturing than in media or retail, it's still valuable protection if, say, your marketing materials accidentally infringe on a competitor's trademark.

What general liability doesn't cover is equally important to understand. It doesn't cover injuries to your own employees—that's what workers' compensation is for. It doesn't cover damage to your own property or equipment—you need commercial property insurance for that. And it typically doesn't cover professional errors, cyber incidents, employment practices claims, or pollution. Those require separate policies.

The Cost Factor: What You'll Pay and How to Save

General liability insurance for manufacturing typically costs $2,000 to $5,000 or more annually. That's significantly higher than the $500 average for low-risk businesses, but it reflects the genuine risks you face. The specific cost for your operation depends on several factors.

Your industry matters enormously. Food processing, chemical manufacturing, and automotive parts production face different risk profiles than textile or electronics manufacturing. What you make, how you make it, and who uses your products all influence your premium. Your annual revenue is another major factor—the more you sell, the more products are out in the world potentially causing claims. The number of employees you have, your location, and your claims history all factor into the equation.

The coverage limits you choose drive cost significantly. Moving from $1 million/$2 million to $2 million/$4 million might increase your premium by 30-50%. Adding a commercial umbrella for additional millions of coverage starts around $2,500 per million. But here's the thing: when you're looking at potential claims in the seven-figure range, these premium increases are modest investments in financial protection.

You can reduce your premiums through several strategies. Implement robust safety programs and document them—insurers reward businesses that actively reduce risk. Consider higher deductibles if you have the cash reserves to handle smaller claims. Bundle your general liability with other commercial policies like property or workers' comp to get package discounts. And shop around—different carriers specialize in different types of manufacturing and their pricing can vary significantly for the same coverage.

Getting Started: How to Secure the Right Coverage

The first step is honestly assessing your risk exposure. Review your contracts to see what insurance requirements vendors and customers demand. Look at your product liability exposure—what's the worst-case scenario if your product fails? Consider your premises liability—how many people visit your facility and what hazards do they face?

Work with an insurance broker who specializes in manufacturing. They understand the nuances of product liability, the importance of products-completed operations coverage, and which carriers offer the best terms for your specific type of manufacturing. They can also help structure a complete insurance program that includes general liability, property, workers' comp, and any specialized coverages you need.

Be prepared to provide detailed information about your operations: what you manufacture, your production processes, your safety protocols, your quality control measures, your revenue, your employee count, and your claims history. The more information you provide upfront, the more accurate your quotes will be.

Don't just accept the minimum required coverage. Yes, your vendor might demand $1 million in coverage, but that doesn't mean $1 million is adequate for your risk exposure. Given that 56% of companies experience a significant business interruption each year and the average downtime cost in manufacturing is $260,000 per hour, the financial stakes are enormous. The difference in premium between adequate coverage and inadequate coverage is trivial compared to the financial devastation of an uninsured or underinsured claim.

General liability insurance isn't just a checkbox on your business setup list—it's fundamental protection that keeps your manufacturing operation viable when things go wrong. With the right coverage limits and a clear understanding of what's protected, you can focus on running your business knowing you're protected against the liability risks that come with the territory.