Page Illustration

FAQ: What is Product Recall Expense Coverage

Friday, 4 June 2021

You have the grit, the passion, and determination to see your company succeed. When you invest so much of your time, hard work, and effort into building a business, you ought to protect it as much as possible. Our expert brokers can identify and assess your business’s risks and find holistic insurance products to protect it from every angle. A commercial broker might offer you a coverage called Product Recall Expense, but what is it? Do you need it? How would it help you in a claim? In this blog we will explain more about Product Recall Expense as a part of your business insurance policy.  

Product Issues & Recalls

When goods are manufactured, products may develop defects or deficiencies that can cause bodily injury, illness, or death when sold and distributed to clients or customers. Defects may also cause physical damage to property. This could result in a lawsuit against your business or having to deal with the headache of recalling faulty products.

As we see a rise in global trade and outsourced manufacturing, the risk of a product recall is an increasing exposure which many companies face. Better regulations, product safety rules, and quality control guidelines intended to protect consumers (and rightfully so!) could also increase your chances of having to recall, repair, or replace goods.

Both lawsuits and recall processes can create a significant disruption in your business operations, leaving you with a damaged reputation and potentially insurmountable financial burdens. If you had to rectify an issue with a product recall, could your business survive? 

What is Product Recall Expense Coverage?

Product Recall Expense Coverage, also known as ‘Product Liability Insurance’, is an insurance coverage designed to protect your business if something goes wrong with a product you manufacture, distribute, or sell. It may cover costs incurred by your business if you had to withdraw, recall, inspect, repair, replace, adjust, or dispose of defective goods or products.

Product Recall Expense Coverage usually offers financial coverage for:

  • Disseminating information about the product recall (radio, television, print, telephone, and other communications)
  • Shipping your business’s goods or products
  • Renting additional warehouse or storage space for your product
  • Hiring additional staff
  • Paying overtime for regular employees
  • Covering necessary costs incurred by employees (transportation/accommodation)

Who Needs Product Recall Expense Coverage?

Product Recall Expense Coverage is a must-have for anyone who sells, manufactures, or distributes a product for consumer use or consumption. Both online retailers and brick-and-mortar operations would benefit from this coverage.

Do your due diligence and confirm that all suppliers, manufacturers, and distributors in your supply chain are insured with Product Expense Coverage. Ask a BIG broker if you need to add them to your policy, or if you need to be added to theirs.

If you import or export goods outside of Canada, always verify that they are compliant with industry standards. Ensure that all labels contain the required and appropriate information. 

How You Handle a Product Recall Matters

Media and social platforms can make news spread more rapidly than ever. This can be damaging to your brand, reputation, and can have financial implications. Product Recall Expense Coverage gives you the financial support to handle the situation with care and precision, while preserving your brand’s reputation.

Does Product Recall Expense Coverage Cover Services Rendered?

No. This coverage is designed specifically for third-party property damage or bodily injury caused by a product you sell, manufacture, or distribute. To protect your business from lawsuits concerning your services (failure to provide service as advertised, negligence, or misconduct), Professional Liability Insurance is the coverage you need. Read our blog on Professional Liability Insurance.


Is Product Recall Expense Coverage right for you? If you’re still unsure of whether this would be a helpful insurance option for your business, get in contact with a BIG commercial broker. We specialize in carefully assessing your business’s risks and finding the best coverage options for you. Here are some helpful tips on what you need to get a small business insurance quote. Contact us today!


By: Amy Legault