Product Liability Insurance: Who Needs It, Recalls, Cost

Product liability insurance pays compensation and legal costs if a product you make, import, sell or supply injures someone or damages their property. In Australia it's usually sold together with public liability as "public and products liability". Importers need particular care: under the Australian Consumer Law, a business that imports goods counts as the manufacturer when the overseas maker has no office in Australia.

This is general information, not financial product advice, and it doesn't consider your circumstances. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you buy, and consider advice from a licensed broker.

For the rest of the insurance picture, see our business insurance overview and public liability insurance guide.

What does product liability insurance cover?

A product liability claim says something you supplied hurt a person or damaged their property. BizCover groups the causes into three kinds of defect:

• Manufacturing faults, such as a batch of chargers with a wiring fault.
• Design defects, where every unit shares the problem.
• Defective warnings, instructions or labelling, such as a missing allergen or an unclear assembly step.

Finder's examples cover the common claim types: burns from an overheating device, water damage from a ruptured plumbing valve, illness from contaminated food or drink, and injury from inadequate warnings or misleading instructions. The policy pays the compensation you're legally liable for and the legal costs of defending the claim, which Aon notes are paid even if you're found not liable.

Business.gov.au points out that you may need product cover "if you make, sell or supply goods", even when the goods are part of a repair or service. A plumber who supplies the tap, an electrician who fits the light and a mechanic who installs the part are all supplying products.

Who needs product liability insurance?

Your exposure depends on where you sit in the supply chain. Use this table to see why your role matters.

If you sell online, our guide to starting an online store covers the rest of the set-up; food businesses should also read how to start a café.

Australian Consumer Law: who counts as the manufacturer?

The ACL's product liability rules (Part 3-5) let a consumer claim compensation from a manufacturer whose goods had a safety defect that caused loss or damage. Product Safety Australia, run by the ACCC, says a business can be the manufacturer if it:

1. makes or assembles the goods
2. imports the goods, if the maker of the goods doesn't have an office in Australia
3. uses its own brand name in relation to the goods
4. promotes itself to the public as the manufacturer
5. permits another person to promote the goods as made by it.

A product has a safety defect if it doesn't meet the level of safety the public is generally entitled to expect. A court decides, looking at how the product was marketed, its packaging, any marks used on it, instructions and warnings, what might reasonably be done with it and when it was supplied. Older products aren't defective just because newer models are safer.

What a consumer can claim:

• injuries to themselves, or injury or death of another person (dependants can claim too)
• economic loss caused by damage to other goods, land, buildings or fixtures.

What the ACL product liability rules don't cover: damage to commercial property, losses from a business relationship such as lost profit, workers compensation losses and losses governed by international agreements. People can still sue under the common law, so your policy should respond to negligence claims as well.

Time limits. A consumer has 3 years from when they became aware, or ought to have become aware, of the loss, the defect and the manufacturer's identity. Every action must start within 10 years of the manufacturer supplying the goods. That 10-year tail is one reason to keep your records, and your insurance history, long after a product line ends.

The importer rule: why importers carry the most risk

If you import from an overseas factory with no Australian office, the law treats you as that factory. An injured consumer is far more likely to claim against you than against a supplier in another country. The ACCC's guidance for sellers puts it plainly: compensation for damages and loss is generally payable by the manufacturer or importer.

What importers can do before the first container lands:

• Check the rules for your product. Search Product Safety Australia's mandatory standards and banned products lists, and get test reports to the right standard.
• Tell your insurer you import. Name the products and countries of origin. Compare the Market's guidance warns that imported products should meet Australian standards or insurers may not cover them.
• Put it in the supply contract. Ask the overseas supplier for compliance evidence, a contractual indemnity and, where possible, proof of their own liability insurance. An indemnity from a business with no Australian assets is only as good as your ability to enforce it, so don't treat it as a substitute for your own cover.
• Keep traceability records. Batch numbers and customer lists make a recall faster and cheaper.
• Price it in. Include insurance, testing and compliance in your landed product cost, and keep your customs and GST paperwork in order.

Retailers and resellers: are you liable for someone else's product?

Yes, in more ways than many shop owners expect.

• Refunds and replacements. Under the consumer guarantees, a seller must provide a refund or replacement for unsafe goods and must not tell consumers to go to the manufacturer. If the problem is a manufacturing defect, the seller can seek reimbursement from the manufacturer, and has 3 years to do so. Our guide to consumer guarantees and refunds explains the remedy rules.
• Compensation. The ACCC says compensation is generally the manufacturer's or importer's responsibility, but the seller may be liable if it can't identify them. Anonymous stock from a trade show or an unbranded online supplier puts you in the firing line.
• Negligence. Separately from the ACL, people can sue under the common law, so a retailer that ignores a known hazard or keeps selling recalled goods takes on risk of its own.

Is product liability bundled with public liability?

Usually. Allianz sells products liability as part of a "Public and Products Liability" policy with limits of $5 million, $10 million and $20 million. BizCover says products cover is typically included in public liability and isn't offered on its own, and Aon says it's typically included in the public liability policies it arranges. The sole trader packs from AAMI and GIO list "Public and Products Liability" together.

What to check on your schedule:

• The word products appears in the cover description, and the limit that applies to it.
• Whether the products limit applies per occurrence or as a total for the period of insurance.
• That your business description includes every product you make, import or sell. A policy written for "retail clothing" may not respond to a candle range you added later.
• Any territorial limits, and whether goods you export or sell to overseas customers are covered.

BizCover describes these policies as generally occurrence based, meaning the policy in force when the injury or damage happened responds. That differs from professional indemnity insurance, which pays claims made while the policy is in force.

Product recall is separate cover

A liability policy pays people you've harmed. It doesn't pay to get the product back. Finder lists what standard policies leave out: retrieving, shipping and destroying recalled goods, notifying customers and managing public relations. Compare the Market notes that recall costs may be available as an optional extra. On top of those, you'll usually carry the cost of refunds and replacements.

Recall insurance (sometimes called product recall or product withdrawal cover) is designed for those costs. It may suit businesses whose products could need a large or urgent recall, such as food, cosmetics, children's products and anything with lithium batteries, but it's a separate purchase with its own exclusions.

Your legal duties apply whether or not you're insured:

• If a product is a safety risk, doesn't comply with a mandatory standard or is banned, you may need to recall it.
• If you start a voluntary recall, you must notify the responsible Commonwealth Minister within 2 days.
• Governments can also order a compulsory recall.

Product Safety Australia's recall steps are: determine if a recall is needed, tell the ACCC, identify affected products and assess the risk, have a recall plan, choose a remedy, plan how you'll communicate, track and adjust, then finalise. Writing a short interruption plan that includes a recall is a cheap way to prepare.

Mandatory standards, bans and the 2-day reporting rule

Standards and bans

Some products must meet mandatory safety or information standards, set nationally by the Commonwealth Minister. Others are banned. Interim bans last 60 days and can be extended by 30 days twice; permanent bans apply nationally. Supplying a banned or non-compliant product is a criminal offence, with civil penalties of the same size.

Maximum penalties for supplying banned goods or goods that don't meet a mandatory safety or information standard, from Product Safety Australia (checked 17 October 2026):

A liability policy is built to pay compensation claims. Don't expect it to pay a penalty or fix a non-compliant product line; assume those costs are yours unless your PDS clearly says otherwise.

Reporting a death, serious injury or serious illness

Anyone in the supply chain must report to the ACCC within 2 days of becoming aware that a consumer product they supplied caused, or may have caused, a death, serious injury or serious illness. That includes retailers, suppliers, wholesalers, distributors, importers, manufacturers, installers and repairers. You can become aware through a customer, social media, a repairer, an insurer or the news.

• Serious means acute (sudden and severe, not a pre-existing condition) and needing medical or surgical treatment by or under the supervision of a nurse or doctor, even if treatment wasn't received.
• Foreseeable misuse counts. Product Safety Australia's example is standing on a chair to change a light bulb.
• It's not an admission of liability, and reports are confidential.

Reporting deadline by the day you become aware (report by 11:59 pm):

Late reports cost money. In February 2016 Woolworths was fined $3.057 million for selling unsafe goods, including $57,000 for failing to lodge 8 mandatory reports on time. In April 2018 Thermomix was fined $4.6 million in total, including $108,500 for 14 late reports, one of them 3 years overdue.

Your policy is also likely to require you to tell the insurer promptly about an incident that could lead to a claim. Check the notification condition and do both.

Online and marketplace sellers

Product Safety Australia says online businesses at every stage of the supply chain must follow product safety law: comply with mandatory standards, don't supply banned products, report serious injuries and recall hazardous products. Its checklist for online shops includes sourcing from compliant suppliers, publishing warnings, labels, age grading and ingredient lists, and listing clear contact details.

Marketplaces add their own insurance rules. Amazon Australia's Business Solutions Agreement (checked 17 October 2026) says:

• If your gross proceeds exceed $10,000 in each month over any three consecutive months, or Amazon reasonably asks, you must take out cover within 30 days.
• The cover is commercial general, umbrella or excess liability insurance of at least $1,000,000 per occurrence and in aggregate.
• It must cover products, products and completed operations and bodily injury, and name the Amazon contracting party as an interested party. Amazon can ask for certificates of insurance.

We didn't verify other marketplaces' terms, so read your seller agreement for an insurance clause before you list. Marketplace fees and returns also eat into the margin that pays for cover; see marketplace profit per order.

Claim scenarios (illustrative)

These are made-up examples to show how the pieces fit. They aren't real cases or claim outcomes.

What product liability insurance doesn't cover

Exclusions vary, but these appear across the providers we checked:

• product recall and withdrawal costs (Finder, Compare the Market)
• injury to you or your employees, which falls to workers compensation (BizCover, Aon)
• damage to your own property, or property in your care, custody or control (Aon)
• professional advice (BizCover); see professional indemnity insurance
• asbestos (Aon, Compare the Market)
• punitive damages (Aon)
• misleading the insurer when you apply, and undocumented design changes (Compare the Market)
• products that don't meet Australian standards may not be covered (Compare the Market).

Ask your insurer directly about goods sold overseas, product categories they won't cover and whether claims from products you supplied before the policy started are covered.

How much does product liability insurance cost?

Because products cover usually comes bundled, providers rarely publish a separate price. The closest public data is BizCover's public liability averages, which include products cover for businesses that sell goods. BizCover says wholesale, retail and health businesses pay more mainly because they can be liable, under the Australian Consumer Law, for injury or damage caused by the services they offer and the products they make or sell.

Average monthly public liability premium, BizCover customers, 1 July 2023 to 30 June 2024 (checked 17 October 2026):

State averages in the same data ranged from $38 a month (WA and Tasmania) to $41 (Queensland and SA), partly because stamp duty on premiums varies by state. These are averages across BizCover's customers, not a quote for your products. For more on what drives liability premiums, see public liability insurance cost.

What drives your premium

Finder lists the main factors, and insurers' application forms ask about each:

• Product type. Pillows and hunting knives don't carry the same risk.
• Sales volume and turnover. More units in more homes means more chances of a claim.
• Position in the supply chain. Makers and importers usually pay more than retailers of branded goods.
• Imports and exports. Countries of origin, and whether you sell overseas.
• Limit and excess. Higher limits cost more; a higher excess lowers the premium.
• Claims history. Past product claims follow you.

Premiums are a deductible business expense; the ATO lists public risk insurance among business operating expenses.

How much cover do you need?

Start with the highest limit anyone you deal with requires: a marketplace ($1 million on Amazon Australia), a retailer or wholesaler you supply, a landlord or a market organiser. Then think about the worst realistic claim. A product sold in thousands of homes, used by children, plugged into the wall or eaten carries more risk than a product used by one business customer. Finder suggests importers of electrical goods, toys, pharmaceuticals, cosmetics and food consider higher limits.

If the products limit is an aggregate for the year, a single faulty batch that causes several claims can use it up. Ask how the limit works before you choose.

Checklist before you sell your first product

• Work out your role for each product line: maker, own brand, importer, wholesaler, retailer or installer.
• Search Product Safety Australia's mandatory standards and bans for every product category.
• Keep test reports, supplier details, batch numbers and invoices, and store them for at least 10 years.
• Confirm your policy lists products cover, the products limit and how it applies.
• Disclose every product, country of origin and sales channel, including online and overseas sales.
• Decide whether recall cover makes sense, and write a simple recall plan either way.
• Set up a 2-day reporting process and tell staff about it. Product Safety Australia publishes an example staff notice.
• Read your marketplace or retailer agreement for insurance clauses and supply certificates of currency on time.
• Ask overseas suppliers for compliance evidence and an indemnity, and check your own cover doesn't depend on it.
• Review your cover every time you add a product line.

Key takeaways

• Product liability covers injury and property damage caused by products you make, import, sell or supply. It is usually part of a public and products liability policy, so check your schedule.
• Under the Australian Consumer Law an importer counts as the manufacturer if the overseas maker has no office in Australia, and so does a business that puts its own brand on goods.
• Retailers must give refunds or replacements for unsafe goods and can be liable for compensation if they cannot identify the manufacturer or importer.
• Liability policies do not pay to retrieve, ship and destroy recalled stock. Recall cover is a separate product.
• Any supplier, from manufacturer to installer, must report a death, serious injury or serious illness linked to a product within 2 days.
• Amazon Australia requires sellers above $10,000 a month for three months to hold $1 million of liability cover including products.

Where to get help

• Product Safety Australia (ACCC): mandatory standards, bans, recalls, mandatory reporting and guidance for online sellers (productsafety.gov.au).
• ACCC: consumer guarantees, supplier reimbursement and product safety responsibilities (accc.gov.au).
• Your state or territory fair trading or consumer affairs office: local enforcement of the Australian Consumer Law.
• business.gov.au: overview of insurance types, including product liability (types of business insurance).
• Australian Financial Complaints Authority (AFCA): free dispute resolution if an insurer refuses a claim (afca.org.au).
• A licensed insurance broker: for importers, manufacturers, recall cover or contract insurance clauses; a lawyer for supplier agreements and indemnities.

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