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Coverage Guide

Product Liability Insurance Coverage in Canada

Product liability insurance helps protect your business if a product you manufacture, distribute, or sell causes bodily injury or property damage to a third party. Even products that meet safety standards can lead to unexpected claims, making the right coverage an important part of managing your business risk.

Coverage may help with eligible legal defence costs, settlements, and damages arising from covered product liability claims, subject to your policy’s terms, conditions, exclusions, and limits.

In Canada, liability for defective products can extend across the supply chain, including manufacturers, importers, wholesalers, distributors and retailers, depending on their role and the circumstances of the claim. Under common law, importers and other parties involved in bringing products to market may face liability for negligence or other applicable claims, even when the product was manufactured overseas.

Note for Quebec: Quebec follows a civil law system. Under Articles 1468 and 1469 of the Civil Code of Québec, manufacturers, businesses that distribute products under their own name, and suppliers, including wholesalers and retailers, may be liable for injury caused by a product safety defect. This can apply whether or not the supplier imported the product.

Product liability insurance is generally included in a Commercial General Liability (CGL) policy under products-completed operations coverage.

At Western Financial Group, our insurance professionals can help you explore coverage options and get a quote tailored to your business, products, and potential risks.

Covered Not Covered

Bodily injury

Helps protect your business if a defective or unsafe product causes physical injury, illness or harm to a third party, including eligible legal defence costs and damages, subject to your policy terms and limits.

Example:

A customer suffers burns from a faulty kitchen appliance you sell. Product liability insurance may help cover eligible medical-related damages and legal costs if your business is held liable.

Property damage

Helps protect your business if a defective or faulty product causes physical damage to someone else’s property, including eligible legal defence costs and damages, subject to your policy terms and limits.

Example:

A defective water filter leaks and damages a customer’s kitchen cabinets and flooring. Product liability insurance may help cover eligible property damage costs and legal expenses if your business is held liable, subject to your policy terms and limits.

Product defects and safety issues

Helps protect your business against covered liability claims arising from products that are allegedly defectively designed, improperly manufactured, or sold without adequate safety warnings or instructions, subject to your policy terms and exclusions.

Example:

A child’s toy has a small part that breaks off and causes an injury. Product liability insurance may help cover eligible legal defence costs and damages if your business is held liable.

Legal defence costs, settlements and damages

Helps cover eligible legal expenses to defend your business against covered product liability claims, as well as settlements or court-awarded damages, subject to your policy terms and limits.

Example:

A customer files a lawsuit after being injured by a product your business sells. Your product liability insurance may help cover legal defence costs and an eligible settlement or court-awarded damages if the claim is covered.

Repairing or replacing your defective product

Product liability insurance generally does not cover the cost of repairing, replacing or refunding your own defective product. These costs are typically considered a business expense rather than third-party liability.

Example:

A batch of faulty electric kettles needs to be replaced because the heating elements stop working. The cost of replacing the kettles would generally not be covered by product liability insurance.

Product recalls

Product liability insurance generally does not cover the costs of recalling, removing, inspecting or disposing of defective products. Separate product recall insurance may be available to help cover these expenses.

Example:

A manufacturer discovers that a batch of packaged food may contain an undeclared allergen and must be recalled from stores. The costs of retrieving and disposing of the products would generally not be covered by standard product liability insurance.

Professional errors or advice

Product liability insurance generally does not cover claims arising from professional negligence, incorrect advice or errors in services provided by your business. Professional liability insurance may help cover these risks, depending on the policy.

Example:

A consultant provides incorrect technical advice about how a product should be installed, resulting in financial losses for a client. These claims may require professional liability coverage rather than standard product liability insurance.

Lost profits and other financial losses alone

Product liability insurance generally does not cover purely financial losses that are not connected to covered bodily injury or property damage. Coverage depends on the policy wording and applicable exclusions.

Example:

A retailer loses sales because a product you supply is frequently out of stock, causing customers to shop elsewhere. The retailer’s lost profits would generally not be covered under your product liability insurance.

 

 

Example:

How Product Liability Insurance Works in Canada

Why Do Businesses Need Product Liability Insurance to Protect Against Unexpected Events

Product liability insurance in Canada helps protect businesses that manufacture, import, distribute or sell products against liability claims if a product causes injury, illness or property damage. Even products that appear safe can have defects, inadequate warnings or unexpected issues that lead to costly legal disputes.

Whether you sell products online, operate a retail store or distribute goods across Canada, the right coverage can help safeguard your business against unexpected claims.

In Canada, liability rules vary by jurisdiction, and businesses may face claims at different points in the supply chain.

Know your baseline

Understanding Your Product Liability Coverage Needs

The right product liability insurance coverage depends on the products you manufacture, import, distribute or sell, as well as your business operations and potential risks. Factors such as product type, sales volume, distribution channels, target markets, product safety standards, and the potential for bodily injury or property damage all influence the coverage you may need. Contractual requirements from retailers, distributors or business partners may also affect your coverage limits.

Understanding your baseline helps ensure your coverage matches your product-related risks.
Avoid underinsurance

The Right Coverage Policy Limits

Insufficient product liability coverage can leave your business responsible for costs that exceed your policy limits following a covered claim. If a product causes serious bodily injury or significant property damage, legal expenses, settlements and damages can add up quickly, potentially placing financial pressure on your business.

Review your coverage regularly to ensure your policy limits reflect your products, sales volume, potential risks and contractual requirements.
Why comparing matters

Compare Coverage Options, Not Just Price

Product liability insurance policies can vary in coverage, exclusions, limits and available endorsements. Comparing options helps ensure your policy provides the right protection against covered claims involving bodily injury or property damage caused by your products.

At Western Financial Group, our business insurance experts can help you compare coverage options and get a quote that balances price and protection to meet your business’s unique needs.
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Why Western

Why Canadians Choose Western Financial

For more than a century, Western Financial Group has delivered trusted, people-first protection to over a million Canadians. We believe in doing insurance the right way, with integrity, care, and community at heart.

Proudly BBB Accredited with an A+ Rating

We’re accredited by the Better Business Bureau (BBB), which means we meet high standards for trust, transparency, and customer service.

Better Business Bureau Accredited Business A+ Rating

That commitment has earned us national and regional recognition across employer culture, customer experience, innovation, and social impact. Our awards reflect the quality of our service, the strength of our team, and the depth of our engagement in communities coast to coast.

IBC Top Insurance Employers 2025
Canadian Business Excellence Awards 2025
Commercial Insurance Brokerage Services of the Year in Canada 2025
Top Alberta Employer 2025
What Our Trusted Customers Are Saying

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★★★★★
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Roman

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"Western Financial Group did an outstanding job reviewing and restructuring my commercial insurance policy. With only a week left before renewal, I switched to Western Financial Group and the entire process was resolved within just a couple of days. They addressed all my concerns, increased the necessary coverage limits, and still managed to lower my annual premium."

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Tina N.

Coquitlam, BC

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"Western Financial Group made getting business insurance for my hair salon so easy! They explained everything clearly, made sure I understood all my options, and found me the best price possible. The whole process was super smooth and stress-free. I really appreciated how knowledgeable, and efficient they were."

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Cindy H.

Pembroke, ON

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"Western Financial Group made the process to get commercial insurance for my small business a breeze!"

Our Numbers Speak for Themselves

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Trusted by Canadians to protect what matters most.

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EMPLOYEES

Our licensed advisors are ready to support you across Canada.

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Cost Factors

What Determines the Cost of Product Liability Insurance in Canada?

The cost of product liability insurance depends on factors such as the type of products you sell, annual revenue, sales volume, distribution markets, claims history and chosen coverage limits. Products with higher potential risks of bodily injury or property damage may result in higher premiums.

It’s also important to consider manufacturing processes, quality control measures, and contractual insurance requirements, as these can influence your premium.

Comparing quotes with Western Financial Group can help you find coverage that fits your business risks and budget.

Factor Impact on Cost Why it Matters
High Sales Volume Massive Increase Higher legal fees and settlements
Importing from Overseas High Increase Importers in Canada may be held liable for harm caused by defective products.
High-Risk Industry High Increase Higher likelihood of causing severe bodily injury, chemical reactions, or property fires.
Robust QA Certification (e.g., ISO, CSA) Decrease Demonstrates that you have quality control measures in place to identify and prevent product defects before shipment.

Annual premiums can range from approximately $500 to $10,000 or more, depending on factors such as product type, annual sales, claims history, coverage limits and the risks associated with your business.

Average premiums are estimates based on typical starting points and may vary depending on the specific business type, industry and risks.

Practical Tips for Product Liability Insurance Every Canadian Business Should Know

Master Your Supply Chain Contracts

Clearly outline product safety responsibilities, indemnification clauses and insurance requirements in agreements with manufacturers, suppliers and distributors. Well-defined contracts can help clarify who is responsible if a defective product leads to a liability claim.

Put responsibilities in writing before problems arise.

Protect Yourself When Importing

When importing products into Canada, verify supplier credentials, request product testing and safety documentation, and ensure products meet applicable Canadian requirements. Remember that importing goods can expose your business to liability even when the products are manufactured overseas.

Verify your suppliers, validate product safety and protect your business from import risks.

Implement Airtight Risk Mitigation

Establish quality control procedures, conduct product inspections, maintain traceability records and address customer complaints promptly. Proactive risk management can help reduce product defects and strengthen your ability to respond to potential claims.

Prevent defects before they happen, and keep records to prove it.

Work With an Insurance Professional

Western Financial Group insurance brokers can help you identify coverage gaps, explain policy wording, and recommend options based on your industry and business operations.

Working with an insurance broker does not cost you more.

Want to see how these factors impact your rate?

Compare quotes in minutes and find out exactly what you could save.

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Ways to Save

Ways to Lower Your Product Liability Insurance

To lower product liability insurance costs in Canada, negotiate supplier indemnification agreements and maintain strong quality-control, product-testing, and batch-tracking records. Consider relevant CSA standards or ISO certifications where applicable to demonstrate effective risk management.

Discounts

Annual Payment Discount +

An Annual Payment Discount is a common feature offered by insurers that provides a reduction in the overall premium when a policy is paid in full upfront rather than in monthly installments.

The average Annual Payment Discount in Canada is typically modest and varies by insurer, but it generally falls in the range of 2% to 7% of the total premium.

Claims-Free Loyalty Credit +

A claim-free loyalty credit is a discount or premium reduction offered by insurers to policyholders who have maintained their insurance without filing any claims over a specified period of time.

Policy Bundling Discount +

A Policy Bundling Discounts is a saving offered when you purchase multiple insurance policies from the same insurer, such as combining Professional Liability (E&O), Commercial General Liability (CGL), Cyber Liability, and Property Insurance under one provider.

The typical discount for bundling in Canada usually ranges from 5% to 15%, depending on the insurer, number of policies combined, and the size and risk profile of the business.

Multi-Location Discount +

A Multi-Location discount refers to pricing advantages offered to businesses that operate from more than one location, or site under the same insurance program.

Instead of treating each location as a separate policy with separate administrative costs, insurers can group them under one master policy or account. This can reduce overall premiums and simplify coverage management.

Smart Savings Strategies

Work With a Broker +

Working with an insurance broker can help businesses secure better coverage, avoid gaps, and often reduce costs by leveraging market access and expertise. Brokers compare policies from multiple insurers to find the most suitable protection for your specific industry, risks, and budget, rather than limiting you to one provider.

They also help identify hidden exclusions, recommend appropriate limits, and ensure your Professional Liability (E&O), CGL, Cyber, and Property coverage work together properly. In addition, brokers can access group programs, negotiate pricing, assist with claims support, and ensure your policy evolves as your business grows, making insurance more tailored, efficient, and cost-effective.

Increase Your Deductible +

Choosing a higher deductible can lower your annual premium because you are taking on more of the smaller claim risk yourself. Just make sure the deductible is an amount you could comfortably pay if needed.

Reduce Claims +

To help reduce the likelihood of product liabilibity claims, businesses should take a proactive approach to protecting their assets. This includes performing regular maintenance, addressing repairs promptly, maintaining safety systems, keeping accurate property records, and updating insurance coverage as the business changes.

Ask About Discounts +

Not every discount is advertised. Ask your broker about claims-free discounts, loyalty pricing, multi-policy binding discounts, and new-client incentives.

Bundle & Save

Save up to 10%

Businesses that bundle their insurance can enjoy meaningful savings, simpler insurance management, and one point of contact for their coverage needs.

  • Save up to 10% on your business insurance
  • Save up to $600 on personal car & home when you bundle with us
  • One broker, one renewal date, simpler management
  • Potential for combined deductibles on shared claims
  • Loyalty benefits that grow with tenure
Bundle and Save Today →
product liability insurance canada

FAQ

Frequently Asked Questions

What is product liability insurance in Canada? +

Product liability insurance helps protect businesses against covered claims involving bodily injury or property damage caused by products they manufacture, import, distribute, or sell.

What is the difference between product liability and general liability insurance? +

Commercial general liability insurance often includes product liability coverage, but the scope depends on the policy. Product liability specifically addresses covered claims arising from products after they leave your business's control.

Is product liability insurance mandatory in Canada? +

It is not generally required by law for every business, but certain industries, contracts, landlords, and retailers may require it.

Does product liability insurance cover online sales (e.g., Shopify, Amazon, Etsy)? +

Yes, but you must, disclose where and how you sell products, ensure your policy covers international sales, if applicable, meet platform insurance requirements (e.g., Amazon requires $1M+ coverage for some sellers).

How much does product liability insurance cost in Canada? +

Premiums vary depending on the product type, annual sales, claims history, coverage limits, and geographic markets. Contact Western Financial Group for an accurate business insurance quote.

Can I get product liability insurance if I manufacture at home or in small batches? +

Yes. Many insurers cover home-based businesses or small-batch makers (like soap, candles, cosmetics), especially if you sell locally or at markets.

Who needs product liability insurance? +

Manufacturers, importers, wholesalers, distributors, private-label brands, and retailers may all need coverage, depending on their products and exposure to liability claims.

Is there a difference between production liability insurance and product liability insurance? +

Product liability covers risks from a finished product after it’s sold, while production liability protects your business during the manufacturing process. Many businesses carry both for complete protection of operations and products.

Does product liability insurance cover imported products? +

It can cover imported products, subject to the policy's terms and exclusions. Canadian importers should confirm their coverage, particularly when purchasing products from overseas suppliers.

What coverage limits should I consider? +

Canada, the product liability insurance limit you choose depends on your product type, annual sales, potential injury risks, and whether you sell internationally.

Typical limits:

  • $1 million: May suit some small businesses with relatively low-risk products, if contractual requirements allow.
  • $2 million: A common option for small and medium-sized businesses, including many retailers and distributors.
  • $5 million or more: Worth considering for higher-risk products, larger sales volumes, manufacturing, importing, or contracts requiring higher limits.

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