Do I need product liability protection insurance?

QUESTION:

If I am planning on starting a company under the liability protection of a LLC or a corporation, do I really need product liability insurance initially to get my product off the ground? I don’t care if my company is small and gets sued and I feel there is always time to purchase insurance when there is a tangible company to protect. Am I leaving myself open for liability or am I fully protected by the LLC/Corp structure.

ANSWER:

Naomi Kokubo

Naomi Kokubo

by Naomi Kokubo, Cofounder of Founders Space

I’ve asked myself the same question.   I can’t speak for your business because I don’t know enough about it, but for all of my own companies I chose to go without the additional expense of product liability protection.  Of course, a lot depends on your product and the risks associated with it.  In reality, you can get sued for practically anything, and sometimes you’re protected by the corporation/LLC and other times you’re not.

The sad truth is that in today’s world you can never 100% protect yourself.  It’s a matter of weighing the risks vs. the expenses.   Product liability insurance is an extra layer of protection, but even that may not guarantee that you are 100% protected.  People can sue you personally for any reason they concoct.  A lot depends on the particular insurance policy and what exactly it covers.   From my personal experience, I’ve seen that most software startups don’t bother getting product liability insurance early on.

That said, it can’t hurt to talk to an insurance expert that you trust.   We have a few advisors on the site who may be able to help.   In your particular case, there may be some compelling reason it’s necessary to have the coverage.

I hope this helps!

Comments & Advice:
  1. Budha Has says:

    Yes 🙂 pls talk to a good lawyer.

  2. Budha Has says:

    Just to be safe, take personal insurance too 🙂

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