What Product Liability Insurance Covers
Product liability insurance covers claims arising from harm caused by your products — most importantly, foodborne illness or allergic reactions. If a customer becomes sick after eating something you made and sues you, product liability insurance covers the legal defense costs and potential settlement or judgment.
Without insurance, you are personally liable. Your personal assets — savings, car, home — could theoretically be at risk in a serious claim.
Do You Need It?
No state cottage food law requires product liability insurance. However:
- Some farmers markets require it — particularly higher-end and larger markets. They often require a minimum of $1,000,000 per occurrence before you can vend.
- It is inexpensive — specialty food product liability insurance runs $300-500/year for $1M-$2M in coverage. This is a very low cost relative to the risk.
- Food liability is a real risk — even if you are scrupulously clean and careful, an undisclosed allergen or a mislabeled ingredient can cause a serious reaction. The financial exposure from a single claim can be catastrophic without insurance.
Where to Get It
Several specialty insurance providers offer food product liability coverage for small and cottage food businesses:
- FLIP (Food Liability Insurance Program) — foodliabilityinsurance.com. Designed specifically for small food businesses including cottage food sellers. $299-349/year range for $2M coverage. Fast online application.
- Farmers Business Network / RLI Insurance — farm and food business policies through agents
- Next Insurance — nextinsurance.com. Instant online quotes for food business liability
- Thimble — thimble.com. Event-based or short-term policies, useful if you only sell at occasional events
What to Look For in a Policy
- Coverage amount: $1,000,000 per occurrence minimum / $2,000,000 aggregate is standard for most market requirements
- Product liability — confirm this is specifically included (some general liability policies exclude food products)
- Additional insured — markets often require being named as an additional insured on your policy. Confirm your insurer accommodates this.
- Home kitchen coverage — confirm the policy covers products made in a home kitchen, not just a commercial facility
When to Get Insurance
Before your first market, if possible. If a market requires it, you cannot vend without it. If you are selling from home or at small events where it is not required, the decision is yours — but the annual cost is low enough that most serious cottage food sellers should carry it.