PRODUCT RECALL INSURANCE
What is Product Recall Insurance?
A Product Recall is an act of removing a batch or production run of products from the marketplace.
Product recall insurance covers expenses associated with recalling a product. Product recall insurance is typically purchased by manufacturers such as food, beverage, toy, and electronics companies.
Product recall insurance reimburses policyholders for financial losses sustained when a product is recalled. Product recalls can be involuntary (required by a regulatory agency or the government) or voluntary (the manufacturer notices a defect that is unlikely to force an involuntary recall), and can be costly.
What is covered?
The insurance is to cover costs such as:
- Customer Notification– Informing each customer that has bought that product not to use the product and inform the company to be recalled.
- Shipping Costs: Transportation to get all the products back to the main manufacture.
- Warehouse and Storage expenses: the company may need to hire more storage to store the recalled products.
- Disposal Costs: to safely dispose of the product without causing any more harm when disposing of it.
- Over Time Work: where the company has to pay their employees overtime to solve the problem.
- Brand Repair: cost to help the business re-grow from the recall incident
What should you know?
A product recall can have long-lasting and costly consequences for your business, affecting reputation, productivity and employee morale. It is essential to avoid product recall by
- Understanding product safety standards and regulations within your industry.
- Assessing manufacturing process and safety.
- Performing regular quality checks
- Being prepared for the worst, having a plan and insurance to execute the plan if things go wrong.
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