Product liability exposure.

Product liability exposure estimates potential claims cost from defective products. Formula: expected defect rate × claim value + recall probability × recall cost. Recommended insurance cover typically 3-5x expected annual exposure to cover catastrophic scenarios.

100,000 units/year × 0.1% defect rate = 100 defects. At 5,000 average claim = 500,000 annual expected claims. 5% recall probability × 5M recall cost = 250,000 annual recall exposure. Total 750,000 annual expected risk. Recommended cover 5x = 3.75M. Most SMBs carry 1-5M product liability insurance, premium 2-10k/year.

Product liability insurance covers: defect claims (injury or property damage), recall costs, defense legal costs. Doesn't cover: known design flaws shipped intentionally, fraud, punitive damages in some jurisdictions. Critical for any business selling consumer goods; the tax authority, retailers (Amazon/Tesco) often require 2-5M minimum cover to list products.

Run it with sensible defaults

Using annual units sold of 100,000, avg claim value of 5,000, defect rate of 0.1%, recall probability of 5%, the calculation works out to 3,750,000.00. Nudge the inputs toward your own situation and the output recalculates instantly. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Annual Units Sold, Avg Claim Value, Defect Rate %, and Recall Probability % — do not pull with equal force. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

How the math works

Expected claims = units × defect rate × claim value. Recall expected cost = recall prob × estimated recall cost (50 × units). Recommended cover = 5× expected exposure. The working is transparent — you can verify every step yourself in the formula section below. No black box, no opaque "proprietary model".

Using this as a check-in

Re-run this every three months. A single reading tells you where you stand; four readings tell you whether things are improving. The trend matters more than any individual snapshot.

What this doesn't capture

The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.