Differences between Product Recall Insurance versus Product Warranty Insurance
Product Recall Insurance
Product recall insurance is coverage to provide reimbursement for covered expenses associated with recalling a product from the market under a covered event. The policy triggers are a voluntary, involuntary or mandatory stock recovery, market withdrawal or recall of an unsafe insured product which results in or may result in bodily injury or property damage. The recall may be made by or on behalf of the insured, his customer or an appropriate regulatory body.
Product recall insurance is typically purchased by manufacturers but can also be purchased by sellers, wholesalers, distributors, importers or exporters. Product recall insurance generally covers costs in performing a recall including items such as advertising, shipping, storage, personnel, disposal, consumer notification, and disposal costs.
Product Warranty Insurance
Product warranty insurance provides an insured method for a manufacturer or seller to extend the limited warranty they offer to the purchaser of their product. The coverage is specific to the operation of the product and generally tied to the mechanical performance. The coverage is for the manufacturer's benefit.
An example would be an LED Manufacturer that wants to offer a 10 years parts limited warranty but wishes to only retain the initial 5 years of the limited warranty. If a unit fails within 5 years after the initial 5 year period the LED would be covered and the cost would be paid by insurer subject to any conditions of coverage.
Product warranty insurance can work well with innovative technology items where the product OEM and sellers want to focus on the features and design of their product, highly competitive industries where a longer warranty offers a competitive differentiator or where an end customer requires some form of financial backing for a limited warranty.
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