Business owners are legally responsible for the products they manufacture, distribute, or sell. Product liability insurance protects Canadian small businesses against the legal and financial risks of claims alleging a product they made, distributed, or sold caused a third party’s bodily injury, illness, or property damage.
It covers claims related to a product’s design, manufacturing defects, contamination, incorrect labelling, or missing safety warnings – and it can pay for legal defence fees, settlements, and judgments if a customer sues.
What Is Product Liability?
When a defective or unsafe product causes third-party bodily injury or property damage, the manufacturer, distributor, or seller bears legal responsibility, known as product liability. Affected third parties or injured customers can file claims or lawsuits against the business owner to seek compensation.
It is essential coverage for manufacturers, distributors, wholesalers, retailers, and e-commerce sellers.
For example, if a customer suffers an allergic reaction to a skincare product you sold them, product liability insurance may cover the injured person’s medical and rehabilitation expenses.
If that person sues your business, product liability insurance may also cover your legal defence fees and settlements or judgments against you.
Does Product Liability Insurance Cover Damages to Business Inventory?
No. Product liability insurance only covers third-party bodily injuries or property damages to customers harmed by a product you made, distributed, or sold.
Commercial property insurance or business contents insurance covers damage caused to a business’s inventory and physical assets by fire, water, natural disasters, theft, or vandalism.
Does Product Liability Insurance Cover Damage to Business Inventory?
No. Product liability insurance only covers third-party bodily injuries or property damage suffered by customers harmed by a product you made, distributed, or sold.
Commercial property insurance or business contents insurance covers damage to your business’s inventory and physical assets caused by fire, water, natural disasters, theft, or vandalism.
Who Needs Product Liability Insurance?
Any small business that makes, distributes, or sells a product – including food – needs product liability insurance, including:
- Manufacturers (food, electronics, health and wellness products, toys, machinery)
- Wholesalers and distributors
- Retailers and e-commerce businesses
- Online sellers (Amazon, Etsy, or Shopify independent sellers)
- Restaurants, cafes, bakeries, packaged food producers
- Automotive parts suppliers and manufacturers
How Much Does Product Liability Insurance Cost in Canada?
What you’ll pay depends on the type and volume of products you sell. The following factors are typically taken into consideration when determining the cost of your premium:
- Your business’s location
- Types of products
- The volume of products sold
- Where you sell your products (Canada only or Canada and other countries)
- The policy’s coverage limits
- Your company’s annual and projected revenue
- Your insurance claims history
The best way to know what product liability insurance may cost your company? Get a free quote in under five minutes.
Does Product Liability Insurance Cover Product Recalls?
Not automatically. It depends on the product liability insurance policy.
Product recalls are first-party losses – expenses that affect a business owner or retailer. Product recall insurance can be added to a product liability insurance policy as an endorsement.
Product liability insurance is often included in a general liability insurance policy, can be added to a business owner’s coverage, or can be purchased as standalone protection.
Frequently Asked Questions About Product Liability Insurance in Canada
What types of claims can product liability insurance cover?
Product liability insurance can protect your business from claims arising when a product causes bodily injury, illness, or property damage. This coverage generally applies to incidents caused by manufacturing flaws, design defects, contamination, improper labelling, incorrect instructions, or insufficient safety warnings. For instance, it can cover scenarios where a customer is injured by a defective tool, experiences illness from contaminated food, or sustains property damage due to a malfunctioning appliance.
Does product liability insurance cover selling products to customers in the U.S.?
However, Canadian retailers selling goods to customers in the United States need to ensure their product liability insurance policy specifically covers U.S. sales, claims, and lawsuits. Speak to a licensed Zensurance broker if you have questions.
Do online sellers and e-commerce businesses in Canada need product liability insurance?
Yes. Selling through a website, Amazon, Etsy, Shopify, Temu, eBay, or social media does not remove product liability risk. If a product you sell allegedly injures someone or damages property, your business could face a third-party claim.
Are Canadian retailers responsible for products they sell that are made by someone else?
Yes, they can be. A customer may sue multiple parties in the supply chain, including the retailer, distributor, importer, manufacturer, or private-label brand. Canada’s Consumer Product Safety Act also prohibits retailers from selling products recalled for health and safety reasons, whether the recall is ordered by Health Canada or undertaken voluntarily in Canada.
How to Get Customized, Low-Cost Product Liability Insurance
Protect your small business from claims and lawsuits over the products you sell with a customized, low-cost product liability insurance policy.
Fill out our online application for a free quote in less than five minutes.
Our brokers are insurance experts who will shop our partner network of over 50 insurers to get the right coverage your business needs, tailor it to suit your specific requirements and budget, and answer any questions.
Let us take the hassle out of getting insured so you can focus on selling and growing your bottom line.
– Updated July 13, 2026.
Business owners are legally responsible for the products they manufacture, distribute, or sell. Product liability insurance protects Canadian small businesses against the legal and financial risks of claims alleging a product they made, distributed, or sold caused a third party’s bodily injury, illness, or property damage.
It covers claims related to a product’s design, manufacturing defects, contamination, incorrect labelling, or missing safety warnings – and it can pay for legal defence fees, settlements, and judgments if a customer sues.
What Is Product Liability?
When a defective or unsafe product causes third-party bodily injury or property damage, the manufacturer, distributor, or seller bears legal responsibility, known as product liability. Affected third parties or injured customers can file claims or lawsuits against the business owner to seek compensation.
It is essential coverage for manufacturers, distributors, wholesalers, retailers, and e-commerce sellers.
For example, if a customer suffers an allergic reaction to a skincare product you sold them, product liability insurance may cover the injured person’s medical and rehabilitation expenses.
If that person sues your business, product liability insurance may also cover your legal defence fees and settlements or judgments against you.
Does Product Liability Insurance Cover Damages to Business Inventory?
No. Product liability insurance only covers third-party bodily injuries or property damages to customers harmed by a product you made, distributed, or sold.
Commercial property insurance or business contents insurance covers damage caused to a business’s inventory and physical assets by fire, water, natural disasters, theft, or vandalism.
Does Product Liability Insurance Cover Damage to Business Inventory?
No. Product liability insurance only covers third-party bodily injuries or property damage suffered by customers harmed by a product you made, distributed, or sold.
Commercial property insurance or business contents insurance covers damage to your business’s inventory and physical assets caused by fire, water, natural disasters, theft, or vandalism.
Who Needs Product Liability Insurance?
Any small business that makes, distributes, or sells a product – including food – needs product liability insurance, including:
- Manufacturers (food, electronics, health and wellness products, toys, machinery)
- Wholesalers and distributors
- Retailers and e-commerce businesses
- Online sellers (Amazon, Etsy, or Shopify independent sellers)
- Restaurants, cafes, bakeries, packaged food producers
- Automotive parts suppliers and manufacturers
How Much Does Product Liability Insurance Cost in Canada?
What you’ll pay depends on the type and volume of products you sell. The following factors are typically taken into consideration when determining the cost of your premium:
- Your business’s location
- Types of products
- The volume of products sold
- Where you sell your products (Canada only or Canada and other countries)
- The policy’s coverage limits
- Your company’s annual and projected revenue
- Your insurance claims history
The best way to know what product liability insurance may cost your company? Get a free quote in under five minutes.
Does Product Liability Insurance Cover Product Recalls?
Not automatically. It depends on the product liability insurance policy.
Product recalls are first-party losses – expenses that affect a business owner or retailer. Product recall insurance can be added to a product liability insurance policy as an endorsement.
Product liability insurance is often included in a general liability insurance policy, can be added to a business owner’s coverage, or can be purchased as standalone protection.
Frequently Asked Questions About Product Liability Insurance in Canada
What types of claims can product liability insurance cover?
Product liability insurance can protect your business from claims arising when a product causes bodily injury, illness, or property damage. This coverage generally applies to incidents caused by manufacturing flaws, design defects, contamination, improper labelling, incorrect instructions, or insufficient safety warnings. For instance, it can cover scenarios where a customer is injured by a defective tool, experiences illness from contaminated food, or sustains property damage due to a malfunctioning appliance.
Does product liability insurance cover selling products to customers in the U.S.?
However, Canadian retailers selling goods to customers in the United States need to ensure their product liability insurance policy specifically covers U.S. sales, claims, and lawsuits. Speak to a licensed Zensurance broker if you have questions.
Do online sellers and e-commerce businesses in Canada need product liability insurance?
Yes. Selling through a website, Amazon, Etsy, Shopify, Temu, eBay, or social media does not remove product liability risk. If a product you sell allegedly injures someone or damages property, your business could face a third-party claim.
Are Canadian retailers responsible for products they sell that are made by someone else?
Yes, they can be. A customer may sue multiple parties in the supply chain, including the retailer, distributor, importer, manufacturer, or private-label brand. Canada’s Consumer Product Safety Act also prohibits retailers from selling products recalled for health and safety reasons, whether the recall is ordered by Health Canada or undertaken voluntarily in Canada.
How to Get Customized, Low-Cost Product Liability Insurance
Protect your small business from claims and lawsuits over the products you sell with a customized, low-cost product liability insurance policy.
Fill out our online application for a free quote in less than five minutes.
Our brokers are insurance experts who will shop our partner network of over 50 insurers to get the right coverage your business needs, tailor it to suit your specific requirements and budget, and answer any questions.
Let us take the hassle out of getting insured so you can focus on selling and growing your bottom line.
– Updated July 13, 2026.
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