From fees to fulfillment, as an Amazon seller, you need to understand where your responsibilities end and Amazon’s begin. That includes getting to know Amazon’s insurance requirements and whether or not you’re exempt.
Is seller insurance really necessary? And what exactly are Amazon’s rules? Most importantly, what are the potential consequences if you decide to forego insurance?
Today we’ll walk through the ins and outs of business insurance for Amazon sellers and the reasons you may want this type of coverage. We’ll also cover how to choose the right kind of policy for your business.
Amazon Seller Insurance Requirements Explained
- Why Do I Need Insurance as an Amazon Seller?
- What Are Amazon’s Insurance Requirements?
- What Type of Insurance Do I Need as an Amazon Seller?
Why Do I Need Insurance as an Amazon Seller?
Amazon requires certain sellers to hold insurance in order to keep selling on its platform. The e-commerce giant wants to ensure that larger merchants are covered, as a means of limiting its own liability exposure.
Amazon Seller Insurance Requirements
If your US-based business does $10,000 USD or more per month in gross sales on Amazon, holding insurance is an Amazon requirement. That requirement kicks in as soon as you hit that number, and you’ll have 30 days to find an appropriate policy.
If you’re based in Canada, the threshold is $10,000 CAD in gross sales, over a period of three consecutive months. If you’re based in Mexico, the threshold is $100,000 MXN, also over three consecutive months. In either country, you don’t need to hold insurance if you don’t exceed the threshold for more than a month at a time.
Regardless of which countries you operate in, as soon as you hit the threshold, Amazon gives you a period of 30 days to find a policy. Amazon may or may not notify you and ask you to provide proof of coverage.
Amazon may also require certain other businesses to hold insurance, at its discretion. In those cases, it will reach out directly and request that you obtain coverage.
Product Liability Insurance
In the 2020 case of Bolger v. Amazon, an Amazon shopper was hospitalized for severe burns after her laptop battery exploded. She had purchased the battery through a third-party seller on Amazon, and decided to sue both the marketplace and the seller. Amazon argued that the third party seller should be held responsible, since Amazon itself didn’t actually produce the product.
While the courts ultimately decided that Amazon was liable, the case illustrates the vulnerability of third-party sellers to expensive lawsuits. Plaintiffs may seek large settlements from the e-commerce giant, not realizing the burden could fall on marketplace sellers.
Even if your products aren’t inherently dangerous, you may still benefit from business liability insurance. It provides an additional layer of protection, in case of accident or injury. For instance, you could be liable if your product has small parts that could lead to a choking hazard.
Any damage caused by your products could result in costly legal ramifications for both you and Amazon. Having insurance covers that liability and ensures that an incident of customer misuse doesn’t turn into an expensive problem.
Liability insurance will also help pay for your court defense and cover settlements up to your insured amount. Without insurance, you’re responsible for paying all legal expenses and settlements out of pocket.
What Are Amazon’s Seller Insurance Requirements?
Here are the latest guidelines and insights on insurance for Amazon sellers. As with every legal and financial decision, make sure you check with a certified professional before selecting a policy.
Policy Minimums
To meet Amazon’s insurance requirements, a seller must hold Commercial General Liability (CGL) and/or Excess Liability coverage. The policy limit must be at least $1 million, per occurrence and in aggregate.
Coverage Requirements
Coverage must include:
- Product liability
- Products/complete operations
- Bodily injury
- Personal injury
- Broad form property damage
- Broad form contractual coverage
All of the sales from your listed products need to be covered as part of your insurance policy.
Names on the Policy
“Amazon.com Services LLC and its affiliates and assignees” must be named on the policy as additional insured parties. The address listed for Amazon is P.O. Box 81226, Seattle, WA, 98108-1226. This also needs to appear on the policy. The legal entity name you provided to Amazon for your store must match the insured name on your policy.
Insurance Provider Information
The insurance provider you choose needs to include global claim handling. It must also have a minimum financial rating of S&P A or AM Best A. Finally, it must also agree to provide Amazon with at least 30 days’ notice for modification, nonrenewal, or cancellation of the policy.
Submitting Your Policy to Amazon
Once you build your policy according to the criteria listed above, you’ll need to obtain a certificate of insurance. You’ll upload this certificate on Amazon Seller Central as proof of insurance to Amazon.
To submit your certificate, go to your Amazon Seller Central dashboard and then click on Settings. From there, navigate to Account Info >> Business Information >> Business Insurance.
Once there, enter the name of your insurance provider, the name of the insured, your policy number, and the start and end dates of the policy.
Then, upload your certificate of insurance and click Submit. If you’ve done everything correctly, the status will say “Submitted.”
After that, Amazon may begin a review process. You should receive an email from Amazon that lets you know the submission’s status. If you’re a new seller or your account has been suspended for any reason, you may need to wait until your policy is approved to begin selling.
What Type of Insurance Do I Need as an Amazon Seller?
Besides the Commercial General Liability and/or Excess Liability Insurance required by Amazon, some sellers may want to hold additional types of insurance or bundle them into their policies.
Here are some of the other common types of seller insurance to consider.
Commercial Property Insurance
You might want insurance to protect your facilities, equipment, inventory, and other physical assets from threats like fire, explosion, theft, vandalism, burst pipes, lightning, hail, wind damage, and more. Depending on where you operate, you may need additional insurance coverage for natural disasters, like hurricanes and volcanic eruptions.
Amazon Suspension Insurance
Amazon suspension insurance may cover the financial losses you incur if and while your seller account is suspended. It can cover things like lost income and costs associated with hiring a professional to help you get your account reinstated.
Workers’ Compensation Insurance
If you have employees, you may need workers’ compensation insurance to cover things like on the job accidents. In the US, legal requirements vary from state to state and often depend on the number of employees you have.
Shipping and Cargo Transportation Insurance
Some sellers may need or want insurance to cover the cost of theft, damages, or losses incurred while transporting products — for example, while shipping their inventory to customers or into Amazon FBA facilities. You may also need commercial auto insurance, depending on your business.
Cyber Insurance
Many businesses are also choosing to get protection against cyber liability. This type of insurance can protect your businesses against the increasing threat of hacks, data breaches, system failures, and other cyber threats. It can prove extremely helpful in the event that your customer data gets leaked, or if you become a victim of a ransomware attack or other cyber incident that disrupts your business operations.
Professional Liability Insurance
Professional liability coverage protects your business if a client or customer sues you for things like copyright or trademark infringement and errors/omissions. This type of insurance can also help you pay for public relations expenses if you need to restore your brand’s image.
Does Amazon Offer Insurance?
Amazon does not offer insurance directly, but it does provide sellers with the Amazon Insurance Accelerator panel, which can pair you up with accepted insurance plan providers.
Amazon doesn’t take any financial cut or finder’s fee from the insurers promoted through the accelerator panel and you aren’t required to use this service. You can select your own insurance policy as long as it meets the above-mentioned Amazon insurance requirements.
Conclusion
Understanding Amazon’s insurance requirements is essential for any seller looking to maintain a successful and secure business on the platform.
By ensuring compliance with Amazon’s policies and securing the appropriate insurance, you can mitigate risks, safeguard your operation, and continue to focus on growing your business with peace of mind.
