Product Recall Expense Endorsements Becoming More Common

Cost-saving endorsements for the budget-minded

An emerging trend offers cost savings to many small businesses. We’re seeing more insurance carriers starting to offer product recall expense endorsements to their Product Liability policies.

These add-on endorsements provide lower cost product recall expense coverage than if a small business had to purchase a stand-alone or individual product recall policy.  Minimum premiums for a stand-alone product recall policy are typically in the $10,000 per year range. That’s often too expensive for most small and start-up businesses.  Product recall expense endorsements allow small business owners to choose a smaller sub limit ($25,000 to $250,000) of their Product Liability limit to be used on for product recall. This provides affordable premiums for 5 to 25% of the total Product Liability premium.

Why you need product recall protection

A product recall or withdrawal is necessary when your product is deemed defective or suspected of a defect that may cause bodily injury or property damage.  The determination that a product needs to be recalled can be made by you or a government entity can order you to withdraw your product from the marketplace.

Product recall expense examples

Any or all of the examples below may be costs associated with a product recall.

1. Notification (stationary, envelopes, printing, postage or facsimiles)
2. Overtime paid to regular non-salary employees and costs they incur
3. Computer time
4. Hiring independent contractors and other temporary employees
5. Transportation, shipping or packaging
6. Warehouse or storage space
7. Proper disposal of your products or products that contain your products that cannot be reused.

The cost of getting this endorsement varies greatly. Costs depend on the limits of coverage you want, the type of products you sell, and the amount of product you have in the marketplace.

When in doubt

If you have  doubts about the need for product recall insurance, I highly recommend you go to www.recalls.gov. Look at the list of recalled products that are similar to yours.  It’s likely you’ll conclude that chances are better of your business facing a recall than a product liability claim.