Product liability insurance: what is the real cost?

A recent contributor to the Nefesh B’Nefesh LinkedIn group asked the question: “what is the cost of product liability insurance in Israel?”  The question is an interesting one, not least because one so rarely hears it asked these days.  There is no single answer since, like any other risk-based service, insurance cover depends on a complex set of interrelated calculations.  If the likelihood of a defective product causing damage is great, the premium will reflect that. However, if the scale of damage inflicted by a defective product is small, claims will be smaller and more easily settled.  To give an example, a pair of socks may be quite likely to be defective but, on the whole, even defective socks cause relatively little damage. A passenger bus may be subject to stringent quality control before it leaves the production line but, if it should fail, the likelihood of damage is colossal.

In reality, “how much does product liability insurance cost?” is only one of a pair of questions which a business must ask itself.  The corresponding question, “what is the cost of not taking out product liability insurance?”, should not be forgotten.

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