What is product recall insurance?

Product Recall Insurance is designed to cover the wide range of costs a business faces if a product it manufactures, supplies, or sells is at risk of being dangerous. This could be because it has been maliciously tampered with, has had a design or manufacturing error, is incorrectly labelled, is subject to malicious threats of contamination or even due to changes in legislation. Because of this, Product Recall Insurance is particularly popular in the automotive, pharmaceutical and food and drink sectors, where safety is paramount.


The implications of a product recall can be far-reaching, impacting not just the financial health of a business but also its reputation and customer trust. Understanding the full spectrum of costs associated with product recalls is crucial. It’s not just about the immediate expenses of withdrawing a product from the market but also the long-term costs related to public relations, brand rehabilitation, and lost profits. A well-structured Product Recall Insurance policy is designed to address these diverse costs comprehensively. 

Product recalls typically have an impact on the following sectors:

  •  Manufacturers
  •  Wholesalers
  •  Retailers
  •  Distributors
  •  Component part suppliers

In the complex scenario of a product recall, time and expertise are of the essence. Our Product Recall Insurance goes beyond just covering costs; it includes the coordination and support of disaster management specialists. These experts play a vital role in managing the recall process, ensuring that it is conducted efficiently and effectively, thereby minimising the impact on your business and customers.

Product recall insurance, or contamination, will only work if the product is potentially dangerous. If it is just faulty, then you will need product guarantee insurance.

What is the difference between product recall insurance and product guarantee insurance?

Product recall insurance and product guarantee insurance share similarities in that both policies aim to protect businesses from financial losses associated with product issues. 

Product recall insurance primarily covers the expenses and financial losses of recalling a product from the market. 

Product guarantee insurance focuses on a product’s performance rather than safety concerns. This insurance covers the financial costs when a product fails to perform as advertised or specified, leading to dissatisfaction or financial loss for the consumer. Coverage can include replacing or repairing defective products and compensating the consumer for losses incurred due to the product’s failure to perform.


What triggers product recall insurance?

Product recall insurance is triggered when products are deemed unsafe or defective and must be withdrawn from the market. This can result from regulatory action, safety concerns identified by the manufacturer, or consumer complaints highlighting potential hazards.

What is an example of a product recall?

Product recalls happen all the time; it’s just that some are more highly publicised than others. They can happen to companies of all sizes and expertise. In 2017, Samsung had a disastrous product recall when they confirmed overheating and burning in their Galaxy Note 7 and S7 phones caused by battery faults. Some people were injured, and airlines banned the phones from flights. Samsung had to recall 2.5 million phones, costing around $5.3 billion.

What are the consequences of product recall?

The consequences of a product recall can include direct financial costs related to withdrawing the product, compensating affected consumers and legal expenses. Indirectly, recalls can damage a brand’s reputation, erode customer trust, and declining sales and market shares.

Is product recall a financial risk?

Yes, product recall is a significant financial risk. It can involve substantial costs for logistics, refund, and legal settlements, not to mention the potential loss of revenue and harm to the brand’s image. These financial implications can impact a company’s profitability and long-term viability.

Do I need product recall insurance?

Product recall insurance is highly advisable if your business manufactures or distributes products. It helps mitigate the financial strain of a recall, covering expenses like customer notifications, product disposal, and sometimes even brand rehabilitation. Considering the potential high costs and reputational damage, it’s a sensible safeguard for any product-based business.

If you would like independent advice on Product Recall insurance please contact us