Insurance for supplements requires more knowledge. If you have purchased, or are thinking of purchasing, insurance for supplement products, read on. Especially if your purchase or quote did not include an explanation.
Insurance purchases for supplement companies seem to fall into two categories:
- Proper insurance product but no understanding of key policy features.
- Inexpensive insurance that will likely not respond when you need it.
Not a rosy picture is it?
Why you should be informed
We will focus this article on the first group noted above, right insurance for supplements but little to no idea how it works. We will also keep it superficial. Learn what you don’t know, then ask for help is the way to go here.
Insurance for supplements bears little resemblance to typical insurance. General Liability, Businessowners Policies, Homeowners, Renters or Car insurance have common features. Insurance for supplement products have features that are well, not normal.
Why are they different? Long exposure period in supplement use creates an unknown for insurers. Insurers build policies to define how and when a claim will be covered. Regular commercial general liability insurance does not compartmentalize risk adequately, so insurers introduce contract terms to better define risk.
The Good Stuff
Features included in insurance for supplement products are similar to medical malpractice, pollution, directors and officers and employment liability insurance policies. What do you need to look for to start your education? Check out the list below.
- Coverage trigger: Claims Made vs Occurrence
- Defense costs reduce the limit of insurance
- Retroactive Date
- Supplemental Extended Reporting Period
- Per Claim or Per Occurrence deductible
- Batch Clauses
- Prior Knowledge of incidents
- Designated Products
- Cancellation clauses
This list is gold. Most insurance for supplements include these features. But, if you are unaware you need to get up to speed. Are they good or bad? Can you improve your policy?
Brokers can supply you with the right policy type but the problem for you, the buyer, is how do these features impact your business and contracts with retailers and distributors (if that is your business model). This is where the lack of understanding can hurt you.
Save yourself a migraine, contact us for more information. I know, very lame for a blog article. Explaining these concepts would be very wordy. To long to keep your interest. It will take a third of the time on a phone call or video chat. We take education seriously, will not be a waste of your time.
Wrong (cheap) Insurance
Now, let us get back to the second group. Please do not take this the wrong way but I will tell you a story, a real life story. Perhaps some of it will sound familiar to you.
Real Life Story
Small company contacts us for insurance for a really really unique product/service that falls squarely in the supplement realm. Insurance was purchased online from Hiscox as a “tech company”. Not untrue but left much of the product story untold. Certificate of Liability insurance issued was accepted by their landlord. Premium was under $800 per year for Commercial General Liability insurance. Product was launched to the public.
This company was working on signing a contract with a larger entity and was wise enough to realize the current insurance would likely not cut it. The happy ending was 5x the price but would actually work if needed and complied with all contractual terms required by the larger entity.
Launching product using insurance designed for a tech company was risky. Changing gears before operations ramped up was a good move.
Don’t Kid Yourself
Take a look at the classification on your policy and a hard look in the mirror, is that really your business? Are you really an “manufacturer’s representative” or “brand consultant” because you have a co-packer/co-manufacturer? You are the manufacturer when your name is on the label, there is little you can do about it.
Last thought, if your insurance does not work, how do you think those Additional Insureds will feel when your policy refuses to pay on their behalf? Fraud, material misrepresentation and breach of contract make a very slippery slope.
Supplement products are booming and will likely stay that way for sometime. Our society has a health crisis that goes way beyond COVID-19. A good product is both helpful and safe but stuff happens and insurance for supplement products is critical. If it does, do you really want to reach for that $500 office policy or reach for a real policy that insures supplements with the knowledge you made the best buying decision you could.