Product recalls make headlines almost daily, from ice cream and produce to cars, toys, and medications. Large-scale recalls are often triggered at the federal level. However, businesses often launch their recalls when they suspect that a product is defective or could lead to injury or property damage. While business owners may never experience a recall, they should protect themselves and their business with product recall insurance. To guide you, we’ve come up with a brief overview of product recall insurance, who needs it, what it covers and how it can help you protect your business.
Product Recall Insurance: A Brief Overview
After four years of investigation, automaker Volkswagen recalled more than 300,000 diesel cars in 2019 after the company admitted to installing software that reduced the effectiveness of the Golf TDI’s emissions control system. The total cost of the recall, including fines, repairs, and legal costs, was a staggering $32 billion. While Volkswagen will undoubtedly survive the reputational and financial damage, they’ve given business owners a free lesson: Don’t lie—and carry product recall insurance. Recall insurance covers everything from customer notification, shipping, processing, and disposal. It even protects the business itself from bankruptcy and financial loss.
Who Needs Product Recall Insurance?
In short, if you manufacture products—and they are your primary source of revenue—you need product recall insurance. Four industries especially benefit from product recall insurance: food, beverage, toy, and electronics manufacturers.
What does Product Recall Insurance Cover?
Recall insurance policies widely vary, but most policies cover the following:
- Replacement, repair, reimbursement
- Hiring extra workers or paying overtime
- Customer communications
- Lost profits
Reasons to Consider Product Recall Insurance
Still on the fence about product recall insurance? Consider the following:
Product recalls happen constantly
The Food and Drug Administration (FDA) enforces 4,500 recalls every year. So that’s nearly 12 recalls every day. While stringent oversight certainly creates a safer market, it also puts business owners at greater risk of a recall. You may never experience a recall—but if you do, product recall insurance offers you and your business protection when you need it most.
Recalls are Expensive
Recalls come with a load of unpleasant and costly bills. Some manufacturers choose to either fix or replace products. In either case, they must notify customers, collect the defective products, and pay for shipping, processing, repairs, or disposal. Costs add up quickly—but product recall insurance helps mitigate them.
Helping You Find the Right Product Recall Insurance Policy
Hoffman Hanono has offered affordable insurance solutions since 1959. Lean on our experience, and we’ll help you find a comprehensive policy that fits your budget and needs, no matter what they are. Get a quote today.