Dietary supplement insurance is insurance specially designed for a business that designs, manufactures, sells or distributes a product or a component of a product that is considered a dietary supplement.
These businesses, along with those that contract out aspects of their manufacturing of the product to operations outside of the United States, need dietary supplement insurance to protect themselves from financial losses from mislabeling the products and injuries to their customers sustained from consumption of the dietary supplement product.
Why Do Businesses in the Dietary Supplement Industry Need Specialized Insurance Coverage?
Companies in the dietary supplement industry face significant risks of financial loss arising out of misleading advertising and customers’ use of dietary supplement products. Without insurance that protects the companies against this liability, the companies would have to pay for their defense and the damage awards out of their resources.
Some of the settlement amounts and court-ordered awards are significant. For example, in 2008, the makers of a vitamin and herbal remedy formula settled a lawsuit and agreed to pay $23.3 million to the claimants. The claimants alleged they had falsely touted the dietary supplement product as a cold remedy.
In 2014, a settlement involving a weight loss dietary supplement was settled for $26.5 million for allegedly false weight-loss claims and endorsements.
In 2015, the New York Attorney General investigated a generic herbal supplements being sold at four major United States retailers. The Attorney General found the companies’ advertising included misleading information and ordered the companies to stop selling a number of popular herbal supplement products.
What Types of Businesses Need Dietary Supplement Insurance?
The range of businesses that need this specialized protection includes any company that is engaged in the business of vitamins, nutraceuticals, or dietary supplements such as:
- Herbal supplements
- Weight loss supplements
- Strength or muscle building supplements
- Endurance enhancing supplements
- Energy enhancements
- Sleep aids
- Keto foods and supplements
- Hydration supplements
- Protein shakes and bars
- Suppliers of the components of dietary supplement products
This list is merely representative of different types of dietary supplement businesses and is not exhaustive. If a company is not sure whether its business is in that industry and could have financial exposure for liability due to misleading advertising, poor labeling or injuries from using the product, that company should consult with an experienced dietary supplement insurance broker for
What Risks Does Dietary Supplement Insurance Cover?
The type of coverages most commonly needed by any company in the dietary supplement industry include:
Basic Commercial General Liability
Companies in the dietary supplement industry need a commercial general liability policy that provides basic commercial liability insurance that covers liability resulting from a range of risks, such as:
Usually, a basic general liability policy will insure the company against:
- Accidental injuries that occur on company premises.
- Product liability for damages resulting from the manufacture or sale of dangerous products, contaminated products, labels that are inaccurate or fail to warn, and from many other activities that pose product liability risks.
- Cost of defense from lawsuits (even frivolous, fraudulent, and groundless).
- Covered injury claims when negligence on the insured’s part can be proven.
Depending on the nature of the dietary supplement business a company operates, the company may need additional coverage beyond that provided under the general liability policy. The types of additional coverage the company may need include:
- Additional Product Liability Insurance that includes options for product recall expense coverage.
- Ingredient exclusion endorsement to cover specific ingredients excluded by the general liability policy.
- Vendors additional insured endorsement.
Factors That Are Considered in Setting Premium Rates
Some dietary supplement products may contain ingredients that pose more risk to consumers than other products. Those products will cost more for the company to insure. The factors that the insurance broker will typically consider include:
- What is the product the company seeks to insure?
- How many of the products will be placed on the market?
- What is the product supposed to be used for?
- Who will be using the product?
- What is the product shelf life?
- Who formulated the product?
- What are the ingredients?
- Where are the product and its ingredients manufactured?
- Who is manufacturing the product and its ingredients?
- What is the quality of the labeling, i.e., usage instructions, disclaimers, and so forth?
- What guarantees and warranties are provided?
- What claims does the manufacturer or distributor make about the product’s efficacy?
For More Information about Dietary Supplement Insurance, Contact the Insurance Experts at Southern States Insurance
Having the right insurance for a business in the dietary supplement industry could be critical to its survival if sued for any product liability claim. The company needs to manage its risks by working with a knowledgeable commercial insurance broker from Southern States Insurance.
One of our brokers can help the company protect itself from potentially catastrophic losses. Contact Southern States Insurance for more information or to get started with dietary supplement insurance todeay.