Defect & Product Recall Insurance

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Product Recall Insurance | Protecting First-Party Product Exposures

It’s what keeps business leaders up at night. A harmful defect in just one product can threaten the health and safety of the general public and has the potential to bankrupt a company. Faulty products cause thousands of deaths each year, countless illnesses as well as costly lawsuits. Be it vehicle air bags, pharmaceuticals or food products, a defective component or product can quickly become headline news. If you are in the business of manufacturing any consumer goods, product recall insurance can help protect your organization for potential exposures.

Key Components of Product Recall Coverage

In the event that your product is faulty, tampered with and/or contaminated, your loss may be protected with product recall insurance. Product recall coverages are designed to isolate a component of your organization’s first-party product exposure.

Recall expense

Revenue losses, the cost of withdrawing a product from market, disposal, testing, overtime wages as well as crisis management quickly add up. Despite the potential for extraordinary bottom-line costs, many organizations fail to prepare with adequate product recall coverage.

Replacement cost

Revenue losses, the cost of withdrawing a product from market, disposal, testing, overtime wages as well as crisis management quickly add up. Despite the potential for extraordinary bottom-line costs, many organizations fail to prepare with adequate product recall coverage.

Lost profits

Product recall insurance indemnifies the insured for profits that would have been earned on the withdrawn products and also for profits that would have been earned on future product sales but which were not earned because of resultant future sales declines. This is usually limited to a specified time period.

Brand rehabilitation expense

Most product recall insurance policies will also indemnify the insured for necessary rehabilitation of the recalled product’s consumer image. The International Risk Management Institute (IRMI) notes that “this includes costs like extra advertising, extra expense to rush a new product to market and special promotions to rebuild public trust in the manufacturer and its products.” 1

Key Components of Product Recall Coverage

Revenue losses, the cost of withdrawing a product from market, disposal, testing, overtime wages as well as crisis management quickly add up. Despite the potential for extraordinary bottom-line costs, many organizations fail to prepare with adequate product recall coverage.

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What Is Product Recall Insurance

From vehicles to pharmaceuticals to food products to cannabis, what can business owners learn from mass media coverage of product recalls? For manufacturers of all types of consumer goods, they might serve as a wake-up call, or reminder, to the potential impact of a product recall event and a lesson in what should be done immediately to prepare for potential exposures. Faulty products cause thousands of deaths each year, causing countless illnesses and lawsuits.

Product Recall Insurance For Canadian Businesses

The Canadian Food Inspection Agency (CFIA) and The Federal Government mandates hundreds of recalls each year, not including voluntary recalls, which are unrecorded. Costs from a product recall or contamination can easily climb into the millions. Long-term losses result not only from the expense of a recall, but may also come from falling sales due to poor consumer confidence, brand rehabilitation expenses and potential shareholder lawsuits.

Despite recall frequency and the potential for extraordinary costs, many companies don’t adequately plan, prepare and practice for – or buy product recall insurance to protect against – product recall events. In addition to proper product recall insurance coverages, careful planning is essential in managing the risk of a recall.

What Does Product Recall Insurance Cover

Product recall insurance for first-party losses caused by product tampering and contamination incidents are broadly labelled as product recall insurance. Product recall insurance policies help to cover the additional costs of a recall, including product loss, costs to withdraw the product from the market, product disposal, product testing, overtime wages, and crisis management — costs that can be devastating because they arise at a time when a company’s revenues are typically hardest hit.

There are several product recall insurance coverage forms, each designed to isolate some components of first-party product exposure. ALIGNED Insurance can ensure your product recall insurance policy provides indemnity for:

The product recall insurance marketplace is highly specialized. ALIGNED Insurance can help secure the coverage you need and collaborate with you to develop a product recall insurance program that meets your needs. Call 1-866-287-0448 to speak with an ALIGNED Insurance advocate or connect with us at www.alignedinsurance.com to learn more.