As regulations, consumer awareness, and oversight increases globally, so does the need for businesses, large and small, to invest in product recall insurance. While there are certainly tips to help avoid a product recall, any business that manufactures, sells, or delivers products or component parts in today’s consumer marketplace is vulnerable to the financial fallout from product recalls – on multiple fronts. The right product recall insurance can help insulate your business from many of those potential consequences.
These are just a few of the primary reasons your business needs product recall insurance.
Recalls are Expensive
Whether you’re a large business or a small one, recalls are costly. They are often most costly for small businesses that specialize in one or very few items. For these businesses one wide-scale recall can be devastating to the point of bankruptcy or going out of business altogether.
Insurance limits your financial exposure should a recall become necessary, or, in some cases, mandatory. The fewer costs your business must bear on your own, the greater the likelihood that the business will be able to survive the recall.
Recall Expenses Extend Beyond the Scope of General Liability
General liability doesn’t cover costs related to replacing or repairing products, shipping recalled products back to your business, researching the problem and creating a cure, shipping new or repaired products back to the buyers, and covering the costs of accidents and injuries in a wide scale recall event.
It’s simply not what general liability insurance does. Many business owners feel that a general liability policy is adequate for all their liability needs and issues and it’s a dangerous game of chance for businesses to take.
Industry Specific Coverages Available
Different industries have different needs and risks when it comes to product recalls. That’s why it’s important to not only get product recall insurance, but also to get the right coverage for your business needs. Specific industries that have unique needs for product recalls include:
- Auto Industry
- Baby Products
- Cosmetic Industry
- Food Industry
- Pharmaceuticals and Medical Device Industry
The list goes on. The key is to find policies that closely match your business needs or to find an agent who can match your business to the right policy.
Preparing for the Worst is Essential to Planning for the Best
The bottom line is that part of creating an effective business plan for the success of your business involved being prepared for the disasters and problems that may arise in the course of doing business.
No business wants to consider the possibility of a product recall, just as you don’t want to consider the negative impact a fire, flood, or hurricane can do to your business. When you take the time to do so, though, you are prepared if and when they do.