Running a manufacturing company can be a very lucrative business model. Consumers and other businesses constantly require goods and materials. Manufacturers who tap into an appropriate customer base can generate regular streams of revenue.
Of course, the profitability of a manufacturing business largely depends on the demand for the company’s products. Higher-quality products tend to generate more demand and therefore more revenue than cut-rate goods of questionable quality. When there are issues with the products, the company’s revenue may drop.
In fact, the products previously sold could become a source of substantial organizational liability. Those starting or assuming control of manufacturing businesses may need to consider investing in recall or product defect liability insurance as a means of protecting their company from potential future setbacks.
How can product recall insurance help?
Recall or product defect insurance can provide support to manufacturers when they need to recall products already released for sale. The policy can help cover expenses related to the recall itself. From communication with customers to the losses generated when refunding purchase prices or repairing defective products, a recall can potentially cost hundreds of thousands of dollars or more.
Depending on the nature of the remedies provided to consumers and the overall extent of the recall, companies may need to replace or repair thousands of defective units. They may also need to absorb the cost of refunding purchases to consumers.
Recall insurance allows an organization to absorb the cost of a substantial product recall without causing budgetary issues. Product recall insurance is typically part of a broader liability policy, which may include product liability coverage. That coverage is also important in a recall scenario.
Product liability coverage can also help in scenarios where consumers make injury or property damage claims against the business. The insurance can potentially provide compensation to those harmed by defective products released by a company.
Those operating organizations in the manufacturing sector often need to carry multiple types of insurance to help offset operational risks. Obtaining product recall insurance can be as important as carrying insurance to protect machinery and workers. Reaching out to the team at Goodkin APC by clicking here or calling 310-758-5923 can help those who run businesses ensure that they have properly mitigated operational liability.