“Challenges are gifts that force us to search for a new center of gravity. Don’t fight them. Just find a new way to stand.” - Oprah Winfrey

When starting their Amazon businesses, many sellers, myself included, often overlook the requirement for liability insurance once they hit $10,000 in monthly revenue.

Upon reaching the $10,000 milestone, you are given a 30-day window to furnish your insurance certificate to Amazon, failing which may result in suspension of your seller account.

While it might seem frightening to some, obtaining e-commerce insurance isn't as complex or costly as one might imagine.

Note: The significance of thoroughly reviewing Amazon's Terms of Service before creating an account and initiating sales activities.

Selling on Amazon is just like running any other business. It's crucial to have the right insurance to protect yourself and your business.

What makes insurance necessary for Amazon sales?

If you're a new or experienced seller, you might not have known that Amazon eventually requires you to have product liability insurance.

You might be wondering, "Doesn't Amazon have my back if something goes wrong?"

Incorrect. Amazon does not assume responsibility, and it's your responsibility as a business owner and Amazon seller to have the necessary insurance.

The rule exists to protect you and your business assets, ensuring you're covered financially for accidents, injuries, or legal issues.

Even though the possibility of a customer suing you might be unlikely, it's best to be cautious and follow Amazon's guidelines just to be safe.

Consider the instance of a couple suing Amazon over defective solar eclipse glasses as an illustration. They allege that the glasses purchased on Amazon failed to safeguard their eyes during the solar eclipse, resulting in vision damage.

As a seller, you might not anticipate harm from seemingly simple products, but accidents can occur. While it may be the furthest thing from your mind when selling on Amazon, it's wiser to protect yourself against unexpected incidents with insurance than to have no coverage at all.

Is it wise to create an LLC to have more protection?

While it's not mandatory to have an LLC (Limited Liability Company) to sell on Amazon, it could be beneficial to consider forming one as your business expands. An LLC can shield your personal assets in the event of a lawsuit, providing an added layer of protection.

This information is not meant to constitute legal, tax, or financial advice. It is recommended that you seek guidance from your own attorney, CPA, or other advisors regarding your individual circumstances.

The requirements for Amazon insurance (and where to get them)

Finding information about Amazon's insurance requirements can be confusing in Seller Central. However, you can find the necessary policies you must follow on the Program Policy help page.

Towards the bottom of that list, you'll find the Pro Merchant Insurance Requirements. Here, Amazon clearly outlines the insurance requirement.

In section 9 of the Amazon Services Business Solutions Agreement, it's stipulated that you must acquire and uphold commercial liability insurance within 30 days after surpassing $10,000 in gross sales on Amazon.com in one month, or if requested by Amazon. You have the option to purchase commercial general, excess, or umbrella liability insurance. Your policy should cover all products listed for sale on Amazon.

The Insurance Requirements page also outlines the criteria that your insurance policy must meet:

Criteria for Insurance Policies

Your commercial liability insurance policy must fulfill all of the following criteria:

1. Policy limits must be a minimum of $1 million per occurrence and in aggregate, encompassing all liabilities arising from or associated with the operation of your business, including products, products/completed operations, and bodily injury.

2.  The policy type can be either commercial general, umbrella, or excess liability insurance, and it must be written on an occurrence basis.

3. Your insurance provider must possess global claim handling capability and hold a financial rating of S&P A- and/or AM Best A- or better. If S&P or AM Best ratings are not applicable or used in the country where insurance is required, a local equivalent is acceptable.

4. Your insurance provider must provide Amazon with at least 30 days' notice of cancellation, modification, or nonrenewal.

5. The policy must designate "Amazon.com Services LLC., and its affiliates and assignees" as additional insured parties.

6. 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;

7. The policy must cover all sales from products listed on the Amazon website.

8. Your insured name must match the "legal entity" name you provided to Amazon. You can find your legal entity name on your Account Info page.

9. The policy must be fully completed and signed.

10. The policy must remain valid for a minimum of 60 days from the date of submission.

So essentially, if your monthly sales exceed $10,000, you'll be required to have insurance coverage with a minimum of $1,000,000.

Even if you're just beginning or haven't reached the insurance threshold yet, it's advisable to have insurance coverage. You never know what might happen with any of the products you sell. Just because you haven't met Amazon's threshold doesn't exempt you from liability if a customer gets injured.

What kind of insurance is necessary for Amazon sellers 

Amazon mandates that sellers have $1 million in coverage. This includes 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

• $1,000,000 in the general aggregate

This insurance must encompass products liability, products/completed operations, bodily injury, personal injury, broad form property damage, and broad form contractual coverage.

You can also meet the insurance limits by utilizing a combination of Commercial General Liability and Umbrella and/or Excess Liability insurance.

However, if you choose this option, the required 'Additional Insured' wording must be as follows:

"Amazon.com, Inc., along with its affiliates and assignees, are additional insured parties, as their interests may be involved."

Amazon states: "Please reach out to your insurer to include 'Amazon.com Services LLC and its affiliates and assignees' at the address 'P.O. Box 81226, Seattle, WA 98108-1226' as additional insured parties."

What is covered by insurance for commercial general liability?

The main takeaway is that Commercial General Liability insurance essentially covers your business against product liability, including three key aspects:

• Bodily injury: This covers medical expenses and legal defense costs related to injuries.

• Property damage: This includes costs for repairing or replacing damaged property belonging to others, along with associated legal expenses.

• Legal fees: CGL insurance assists in covering legal defense costs linked to product liability claims.

When is it necessary to get umbrella or excess liability insurance?

Excess liability insurance covers claims that surpass the limits of your primary insurance policy. It's intended to complement a single primary policy and must be purchased separately for each primary policy you wish to extend.

Umbrella insurance serves as a type of excess liability coverage that enables you to extend primary coverage across multiple underlying policies simultaneously. For instance, with a single Umbrella insurance policy, you could extend coverage for commercial general liability, commercial auto, and worker’s compensation all at once.

You should consider Excess Liability insurance for your Amazon business if:

1. Your current insurance policy doesn't meet Amazon's coverage requirements.

2. You're selling a high-risk product that carries significant liability risks.

Will Amazon pay for any disputes?

Yes, Amazon will cover any claims under $1,000, but this is subject to certain conditions.
Amazon's A-to-Z guarantee states:

"Amazon will handle and cover valid property damage and personal injury claims against sellers under $1,000 as a goodwill gesture to customers. Claims under $1,000 constitute more than 80% of cases in our store, and Amazon will cover these expenses without seeking reimbursement from sellers who comply with our policies and possess valid insurance. These concessions will not impact your order defect rate, and you will receive updates at every stage to ensure the safety of your products."

The key takeaway from this is "sellers who abide by our policies and hold valid insurance."

This indicates that Amazon will only cover claims under $1,000 if you maintain sufficient, Amazon-approved liability insurance.

Where to purchase liability insurance and what the premiums are

Where to purchase liability insurance and what the premiums are

Applying for Commercial General Liability, Umbrella, and/or Excess Liability Insurance coverage is quite straightforward. Just reach out to insurance companies to request quotes. (Amazon-specific insurers are listed below.)

The cost of Amazon insurance

While quotes differ for each seller, your quote generally depends on your estimated annual revenue, as product liability insurance is the primary requirement.

On average, the cost ranges from $500 to $1,000 per year. However, some providers offer policies for as low as around $300 per year.

Here are some factors insurance providers take into consideration:

• Your product: The type of product you sell significantly influences your insurance costs. Insurance providers evaluate the risk level associated with your product. Selling a high-risk product? Expect higher premiums.

• Insurance type: The type of policy you choose impacts your premium. A more comprehensive umbrella policy will have higher premiums compared to a standard commercial general liability policy.

• Revenue: As your business grows and you generate higher annual revenue, your premiums generally increase.

Pay-per-sale insurance for Amazon 

As a standard practice, Commercial General Liability insurance policies typically rely on annual sales and revenue forecasts, leading sellers to commit to an annual premium. This means sellers depend on the accuracy of their forecasts to avoid the risk of being either under or over-insured.

A successful Prime Day or Black Friday sale exceeding expectations can expose your business to liability claims if you haven't obtained sufficient coverage. Conversely, a seasonal downturn could result in overpaying for coverage that isn't necessary.

The pay-as-you-sell insurance model entails paying for coverage based solely on the precise number of units sold.

This is demand-based insurance. 

Choosing a pay-as-you-sell policy over an annual one can result in more precise pricing and improved cash flow for your Amazon business.

Amazon Insurance Accelerator

Amazon's insurance accelerator streamlines the process of acquiring insurance for sellers, making it both easier and more cost-effective. Through a partnership with Marsh, they offer access to a network of reputable insurance providers. This allows sellers to swiftly obtain quotes and secure insurance coverage without delay.

Insurance providers that focus on Amazon sellers

Several insurance companies specialize in catering to Amazon and e-commerce sellers, including:

• Well Insurance

• Next Insurance

• Bunker Insurance

Utilizing these companies offers the advantage of their expertise in understanding the specific coverage requirements of Amazon sellers, ensuring that you obtain the appropriate insurance for your business needs.

Does Amazon need me to post my insurance proof?

Indeed, after obtaining insurance, it's essential to upload your Certificate of Insurance to Seller Central. You can easily request this certificate from your insurance provider, and once obtained, uploading it ensures compliance with Amazon's requirements and provides proof of coverage for your business operations on the platform.

I sell things in the US as an international seller. How am I going to get insurance?

Feel free to reach out directly to the insurance companies listed in Amazon's Insurance Accelerator program. Additionally, you can contact Marsh, a global insurance broker specializing in assisting international sellers in obtaining the necessary insurance coverage.

Secure both your Amazon business and yourself.

Indeed, securing insurance for your Amazon business is more manageable than you might anticipate. Not only does it provide crucial protection for you and your business, but it also offers peace of mind, allowing you to concentrate on expanding your operations with confidence.

Overview

Before you start selling on Amazon, be sure you know all the rules and regulations that may affect your business. Once your monthly sales hits $10,000, liability insurance becomes an often-overlooked factor.

Here at AMZ Shifu, we help you take the right steps since we know how important it is to protect your business. With our help, you may do the task at a lower cost and with less hassle than you would think.

Book a Call with us today!

Schedule a call with us immediately to find out how we can assist you in safeguarding your business and thriving on Amazon—don't take the chance of having your seller account suspended.