We often get calls from prospects wanting to buy product recall insurance. After a little while of discussion it becomes obvious that most of the prospects are really looking for product warranty insurance. It is important to understand that the trigger for Product Recall Insurance is the potential for the product to cause bodily injury or property damage and as a result, is considered to be unsafe and must be removed from the market or public. Product warranty is much more passive and involves a promise to repair or replace or refund the purchase price of a product because it fails to meet a particular standard of performance.
Increasingly, large retailers are asking manufacturers, distributors and wholesalers to warranty their products in the event they fail to perform to a reasonable standard for the retail customer and the retailer is forced to take back the products and provide refunds.
Most manufacturers or importers that contact me are looking for an inexpensive way to protect their profits in the event they are forced by warranty or indemnity agreement with the distributor to take back product. To the best of my knowledge, there are no insurance carriers willing to provide this type of insurance coverage. Most warranty insurance coverages are extended warranties for the repair of automobiles and equipment such as electronics, washing machines, etc.
Important point – product warranty insurance is provided for the end user. For example, when you buy a car or washing machine, you can purchase an extended warranty insurance to cover repair or replacement costs. This insurance is a money maker for the retail establishment and the insurance carriers that provide this coverage.
In most cases, companies that call and ask for product recall or product warranty insurance are in fact looking for cheap insurance that would protect their profits in the event they would have to take back their product because the product was defective or simply did not perform as advertised.