Product liability insurance is designed to cover losses arising from claims that a product made or sold caused harm to another. These claims may be asserted in the form of a lawsuit and products liability insurance policies can provide coverage to help pay for the costs associated with legal fees, medical costs to claimants, as well as settlements and judgments to the extent liability is found.

Product liability claims generally falls into one or more of the four following categories:

Strict liability, which means a finding of automatic liability even if the business is not held to be negligent or at fault.
Warning defects where the product does not provide sufficient precautions or notice on labels, marketing, packaging, or instructions.
Manufacturing defects that may occur from an assembly or production error.
Design defects that occur as a result of a mistake or error in the product design before the actual product is manufactured.

Product liability insurance policies typically only cover certain liability losses and commonly exclude operational interruptions, employee injuries, product recalls, inventory loss, theft, or damage from natural events (other types of insurance policies may offer coverage for these claims).