When most sellers first start their Amazon business (myself included), they often don’t realize that when you reach $10,000 in revenue in any given month, Amazon will require you to take out a liability insurance policy.
Once you hit that $10K milestone, you then have 30 days to provide your certificate of insurance to Amazon or risk your seller account being suspended.
This may sound intimidating to some, but e-commerce insurance isn’t as complicated (or expensive) as you may think.
Side note: This is why it is very important to read Amazon’s TOS before you open an account and start selling.
If you’re selling on Amazon, you need to treat it like any other business, and having the proper insurance to protect yourself and your business is part of that.
Why do you need insurance to sell on Amazon?
If you’re like many new or experienced sellers, you probably didn’t realize that Amazon, at some point, requires you to have product liability insurance.
You may be thinking, “Well if anything goes wrong Amazon has my back, right?”
Wrong. Amazon does not want the responsibility and it is up to you, as a business owner and Amazon seller, to have the proper insurance.
The reason behind this rule is very simple: To protect yourself/your company’s assets and cover any financial obligations resulting from accidents, injuries, or litigations.
And while the chances of a customer suing you may be low, it’s better to err on the side of caution — and adhere to Amazon’s rules.
Take the case of a couple suing Amazon for faulty solar eclipse glasses as an example. The couple claims the glasses they bought on Amazon did not protect their eyes during the solar eclipse and ruined their vision.
As a seller, you may not think such a simple product would harm anyone, but accidents do happen. It’s probably the last thing on your mind when selling products on Amazon, but better to protect yourself from unforeseen incidents than to not have insurance at all.
Should you form an LLC for added protection?
Although it’s not required to have an LLC (Limited Liability Company) to sell on Amazon*, it may be a good idea to form one in the future as your business grows, since an LLC protects your personal assets in case of a lawsuit.
Having an LLC plus product liability insurance will give you more peace of mind, especially if you are a bigger seller.
*This is not intended to serve as legal, tax, or other financial advice. For this reason, you are advised to consult with your own attorney, CPA, and/or other advisors regarding your specific situation.
Amazon insurance requirements (and where to find them)
In Seller Central, it is a little unclear where to find information on Amazon’s insurance requirements. But, on the Program Policy help page, Amazon lists numerous policies that you, as a seller, must abide by.
Towards the bottom of that list, you will see Pro Merchant Insurance Requirements. On this page, Amazon clearly states what the insurance requirement is:
“Under section 9 of the Amazon Services Business Solutions Agreement, you are required to obtain and maintain commercial liability insurance within 30 days after exceeding $10,000 in gross proceeds in sales in one month on Amazon.com, or if otherwise requested by us. You may purchase either commercial general, excess, or umbrella liability insurance. When you decide on an insurance, your policy should cover all products you list for sale on Amazon.”
The Insurance Requirements page also states the criteria your insurance policy must meet:
Insurance policy criteria
Your commercial liability insurance policy must meet all of the following criteria:
- Policy limits must be at least $1 million per occurrence and in aggregate, covering all liabilities caused by or occurring in conjunction with the operation of your business, including products, products/completed operations and bodily injury;
- Policy type can be either commercial general, umbrella, or excess liability insurance and must be written on an occurrence basis;
- Your insurance provider must have global claim handling capability and a financial rating of S&P A- and/or AM Best A- or better (if S&P or AM best is not valid or used in the country where you are required to obtain insurance, a local equivalent is allowed);
- Your insurance provider must give Amazon at least 30 days’ notice of cancellation, modification or nonrenewal;
- The policy must name ” Amazon.com Services LLC., and its affiliates and assignees” as additional insureds;
- The deductible for any policy(ies) must not be greater than $10,000 and any deductible amount must be listed on the certificate(s) of insurance;
- The policy must cover all sales from products you have listed on the Amazon website;
- Your insured name must match the “legal entity” name you provided to Amazon (To view your legal entity name, see your Account Info page);
- The policy must be completed in its entirety and signed; and
- The policy must be valid for at least 60 days from the date of submission.
So basically this means if your sales are over $10,000 in one month, you will need to carry insurance with at least $1,000,000 in coverage.
Even if you’re just starting out or are a little below the insurance threshold, we still recommend being insured. You never know what could happen with one of the products you sell. And just because you don’t meet Amazon’s threshold doesn’t mean you won’t be liable if a customer gets injured.
What type of Amazon seller insurance you need
Amazon requires sellers to have $1M in coverage.
You must have Commercial General Liability (CGL) coverage with limits of no less than:
$1,000,000 per occurrence, $1,000,000 in the aggregate for products and completed operations, and $1,000,000 in the general aggregate. Such insurance must include products liability, products/completed operations, bodily injury, personal injury, broad form property damage, and broad form contractual coverage.
You may also satisfy the insurance limits by using any combination of Commercial General Liability and Umbrella and/or Excess Liability insurance.
However, if you do this, the required ‘Additional Insured’ wording must be as follows:
“Amazon.com, Inc., its affiliates and assignees are additional insureds, as their interests may appear”
Amazon states: “Please contact your insurer to add ‘Amazon.com Services LLC and its affiliates and assignees’ with address ‘P.O. Box 81226, Seattle, WA 98108-1226.’ as an additional insured.”
What does Commercial General Liability insurance cover?
The main takeaway is that Commercial General Liability insurance essentially covers your business against product liability, including three key things:
- Bodily injury: This may include medical expenses and legal defense costs
- Property damage: This may include the cost to repair or replace damaged property belonging to others, as well as related legal expenses
- Legal fees: CGL insurance helps businesses cover the costs of legal defense related to any product liability claims
Some Commercial General Liability policies may also cover advertising injury, which includes claims of slander, libel, copyright infringement, or misappropriation of advertising ideas.
When would you need Excess Liability or Umbrella insurance?
Excess liability insurance covers claims that exceed the limits of your primary insurance policy. It is designed to extend just one primary policy and must be bought separately for each primary policy you want to extend.
Umbrella insurance is a form of excess liability coverage that allows you to extend primary coverage on multiple underlying policies at once. For example, under a single Umbrella insurance policy, you could extend commercial general liability, commercial auto, and worker’s compensation all at once.
You should consider Excess Liability insurance for your Amazon business if:
- Your existing insurance policy doesn’t meet Amazon’s coverage requirements
- You are selling a high-risk product that poses more significant liability risks
Will Amazon cover any claims?
Yes, Amazon will cover any claims under $1,000. But, this comes with some conditions.
Amazon’s A-to-Z guarantee states:
“Amazon will resolve and pay for valid property damage and personal injury claims against sellers under $1,000 as a concession to customers. Claims under $1,000 account for more than 80% of cases in our store, and Amazon will bear these costs and not seek reimbursem*nt from sellers who abide by our policies and hold valid insurance. These concessions will not affect your order defect rate, and you will be kept informed at every step so you can continue to ensure your products are safe.”
The key takeaway from this is “sellers who abide by our policies and hold valid insurance.”
This means Amazon will only cover claims under $1,000 so long as you hold adequate, Amazon-approved liability insurance.
Where to get liability insurance and how much it costs
Applying for Commercial General Liability, Umbrella, and/or Excess Liability Insurance coverage is pretty straightforward. Simply contact insurance companies to receive quotes (Amazon-specific insurers are listed below).
How much Amazon insurance costs
While quotes vary for every seller, your quote will usually be based on your estimated annual revenue since it is largely product liability insurance that is required.
The average cost is typically around $500-$1,000 per year. However, some providers do offer policies as low as around $300 per year.
Here are some factors insurance providers consider:
- Your product: The type of product you sell has a significant impact on your insurance costs. Insurance providers assess the ‘riskiness’ of your product. Selling a high-risk product? Expect a higher premium.
- Insurance type: The type of policy you take out will affect your premium. A more complex umbrella policy will have higher premiums compared to a standard commercial general liability policy.
- Revenue: As your business scales and you increase your annual revenue, your premiums will typically increase.
Pay-as-you-sell Amazon insurance
As standard, Commercial General Liability insurance policies tend to be based on annual sales and revenue forecasts, locking sellers into an annual premium. As a seller, this leaves you reliant on the accuracy of your forecasts to ensure you’re not at risk of being either under or over-insured.
A better-than-expected Prime Day or Black Friday sale can leave your business vulnerable to liability claims if you haven’t secured enough coverage, while a seasonal slump could mean overpaying for cover you don’t even need.
Pay-as-you-sell is an insurance model that means you only pay for coverage on the exact number of units you sell.
It’s insurance on demand.
So opting for a pay-as-you-sell policy versus an annual policy means more accurate pricing and better cash flow for your Amazon business. For example, Assureful offers flexible monthly premiums from $26/month. Connected directly to your seller accounts, your premium auto-adjusts in line with last month’s sales so you can focus on scaling your business with peace of mind that every sale you make is covered.
Amazon Insurance Accelerator
Amazon’s insurance accelerator makes it easier and more affordable for sellers to obtain insurance. They partnered with Marsh to offer a network of vetted insurance providers so you can quickly obtain quotes and get insured fast.
Insurance companies specifically for Amazon sellers
Here are a few insurance companies that work specifically with Amazon and e-commerce sellers:
- Assureful (our recommended provider)
- Well Insurance
- Next Insurance
- Bunker Insurance
What’s great about using the insurance companies listed above is that they will know exactly what type of coverage you need as an Amazon seller.
Do I need to upload proof of insurance to Amazon?
Yes, once you obtain insurance, you must upload your Certificate of Insurance to Seller Central. You can request the Certificate of Insurance from your insurance provider.
I am an international seller selling in the US. How can I obtain insurance?
Contact the insurance companies that Amazon has listed in their Insurance Accelerator. You can also contact Marsh, a global insurance broker that can help international sellers obtain the required insurance.
Protect yourself and your Amazon business
And that’s it! As you can see, getting insurance for your Amazon business isn’t as difficult as you might think. Plus, it will give you and your business some much-needed protection (just in case).
In other words, have peace of mind so you can focus on growing your business!
If you have any other questions regarding Amazon seller insurance, please leave a comment below!
Learn more about how you can use Jungle Scout to start, run, and grow your Amazon business.
Learn more
)
