DEFINITION of 'Product Recall Insurance'

Insurance that covers expenses associated with recalling a product from the market. Product recall insurance is typically purchased by manufacturers such as food and beverage, toy and electronics companies to cover costs such as customer notification, shipping costs and disposal costs. Coverage generally applies to the firm itself, though additional coverage can be purchased to cover the costs of third parties.

BREAKING DOWN 'Product Recall Insurance'

Product recalls can be involuntary (required by a regulatory agency or the government) or voluntary (the manufacturer notices a defect that is unlikely to force an involuntary recall), and can be costly. Some product types are generally not covered under product recall insurance, such as automobiles and related products, explosives and tobacco.

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