Products-completed operations coverage is part of a general liability policy that pays for various types of injuries or property damage to customers caused by your company's products.

This coverage is found in either a general liability policy or a business owners policy (BOP). Many businesses use BOP to get better coverage at a better deal than buying its components separately. BOP is a combination of general liability and commercial property insurance.

Products-Completed Operations Coverage vs. Standalone Product Liability Insurance

Small businesses are often comfortable with a standard general liability insurance plan. However, large manufacturers that face greater risks typically select standalone product liability insurance coverage. These customized plans usually allow for much higher coverage limits than standard plans.

If your company distributes thousands or millions of units, it's possible to face a class-action lawsuit from a long list of dissatisfied customers when the product malfunctions or doesn't live up to its claims. Carrying appropriate coverage helps avoid litigation costs cutting into profit margins.

A products-completed operations plan is usually written on an occurrence basis within your general liability policy. That means the policy must be in effect when a claim is filed.

Whether it's a bar that serves drinks to drunks causing fights or a food producer that markets food that makes people ill, angry customers can stack a pile of lawsuits against your firm. These lawsuits can be for numerous factors that may involve medical bills, repair bills, and legal costs. Products-completed operations coverage saves your business from getting financially hammered by a multitude of lawsuits. It typically covers accidental contamination, labeling mistakes, accidental defects, and malicious tampering.

A products-completed operations policy does not cover claims after you discontinue coverage. It also does not cover incidents that occur at your establishment. The claim must come from a location beyond your store and usually won't be covered if it involves a customer mishap on your premises. However, a different portion of your general liability policy might pay for certain injuries or damage.

The coverage pertains to other people's property, and it isn’t concerned about damage to your product or damage to your work environment. It also doesn't cover damage to impaired products, nor does it cover any recall expenses.

Products-Completed Operations Coverage Policy Limits

The coverage limits of a products-completed operations plan are separate from the broader general liability policy. For coverage of product issues, the insurance company pays claims based on an aggregate limit regarding products. So while most claims count against the long-term aggregate amount of reimbursements insurers pay, products-completed operations claim will cover only the count against the aggregate limit for product liability.

Products-Completed Operations Coverage Plan Example

Suppose there’s a retailer that sells jet skis and motorboats. Such a business will definitely need product-completed operations coverage. Water sports equipment that falls short of safety standards can trigger a class-action lawsuit. The lawsuit might be directed at various other entities involved with the making and distribution of the product besides the retailer.

More: How to protect your business with product liability insurance

Any business that manufactures a product should carry this coverage. Many companies stick with a standard plan, but the more vast your distribution is, the more you should consider a products-completed operations plan. A general liability policy typically provides this coverage with a limit of $100,000.