When selling on Amazon, there’s a lot you need to know. From fees to fulfillment, you’ve got to understand where your responsibilities end and Amazon’s begin. That includes getting to know Amazon’s insurance requirements.
But is Amazon seller insurance really necessary? And what exactly are Amazon’s requirements? Most importantly, what potential consequences could you be opening yourself up to if you decide to forego this protection?
Today we’ll walk through the ins and outs of business insurance for Amazon sellers, detailing Amazon’s seller insurance requirements and the reasons why you may want this type of coverage. We’ll also cover what kinds of insurance you may need and where to find it.
As always, be sure to check with a certified legal professional before making any decisions about which insurance you’ll use.
Amazon 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?
Merchant accounts on Amazon may not require insurance as long as they are below a certain sales threshold. However, if you’re surpassing $10,000 per month in gross sales for three consecutive months, Amazon will require you to purchase business insurance.
Once that $10,000 monthly sales threshold is exceeded, you’ll have a 30-day period to obtain your insurance policy.
But if you’re selling less than $10,000 per month on Amazon, you might be asking yourself whether you should still protect your business with insurance.
The answer to that is probably yes.
The Case That Set a Precedent for Amazon Insurance Requirements
Look no further than the case of Bolger v. Amazon as an example. In this case, an Amazon shopper was able to sue the e-commerce titan for a faulty laptop battery.
The jury ultimately found on appeal that Amazon was liable, even though it didn’t actually produce the item. That ruling also leaves e-commerce businesses like yours vulnerable to expensive lawsuits.
Even if your products aren’t inherently dangerous, you may still benefit from business liability insurance for an additional layer of protection. For instance, you could be liable if your product has small parts that could lead to a choking hazard. The same goes for allergic reactions or battery issues that could lead to bodily injury or property damage.
When you have liability insurance, the insurance company will help pay for your court defense and cover settlements up to your insured amount. In terms of Amazon’s insurance requirements, that’s a minimum of $1 million.
If a company were to face that same lawsuit with no insurance in place, it would have to pay for its own legal expenses as well as any settlements out of pocket. If it’s a fairly large settlement, this could put a lot of financial strain on your business or even bankrupt you.
Since Amazon is well known as one of the wealthiest companies in the world, people don’t often realize that Amazon sellers are primarily smaller businesses. That means plaintiffs in these lawsuits are more likely to seek large settlements.
For most sellers, it’s simply not worth the risk to go uninsured.
What Are Amazon’s Insurance Requirements?
Amazon wants to ensure that larger merchants are covered as a means of limiting its own liability exposure in the event your products cause some kind of accident or injury.
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.
We’ve reviewed the latest guides and insights covering insurance for Amazon sellers. Here’s what you need to know. And as with every legal and financial decision, make sure you check with a certified professional before selecting a policy.
Policy Minimums
By most accounts, your insurance policy needs to be umbrella, commercial general, or excess liability in order to meet Amazon’s requirements. It must also be occurrence-based, with exceptions made for specific product categories
The limit on the policy needs to be a minimum of $1 million per occurrence and in aggregate. It needs to cover any and all liabilities surrounding the operation of your business.
Coverage
Coverage must include product liability, products/complete operations, bodily injury, personal injury, broad-form property damage, and 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. 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 upload proof of insurance to Amazon.
Go to the Seller Central dashboard and upload your policy under Settings by navigating to “Account Info” and then “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.
After that, simply upload your proof of insurance certificate to the system and submit it. If you’ve done everything correctly, the status will say “Submitted.”
Amazon then begins the review process. Once that’s done, you should receive an email from Amazon that lets you know the submission’s status. When it says no further action required, you’re ready to start selling.
Once you have met all Amazon insurance requirements, you’ll officially have an active Amazon insurance policy and are free to sell your products while under the plan’s protection.
Lastly, the certificate of insurance needs to be an original document that contains an additional insured endorsement. On the certificate, you’ll need to list all subsidiaries and DBAs covered by this policy. You’ll also need to complete and sign the certificate.
What Type of Insurance Do I Need as an Amazon Seller?
When selecting your insurance, it’s important to understand what kind of insurance you’ll need. Amazon is very clear on what it requires and by paying careful attention during the policy selection process, you can save yourself a lot of time.
As an Amazon seller that makes more than $10,000 in gross sales for three months in a row, you are required to have liability business insurance for a minimum of $1 million per occurrence in aggregate.
The insurance must also cover issues related to:
- Personal injury
- Bodily injury
- Broad form property damage
- Broad form contractual damage
- Products liability
- Products/complete operations
Most general liability policies cover personal injury, bodily injury, and property liability by default.
You may want to ensure that you have product liability coverage included, as failure to do so may lead to Amazon rejecting your policy.
There is also Amazon suspension insurance, which is fairly new and not yet required. However, it’s something you still may want to look into. With Amazon suspension insurance, you’re covered financially if Amazon suspends your account. You can usually bundle this policy with your general liability insurance.
You can also include shipping and cargo insurance that will cover any shipping damages incurred while transporting your Amazon products.
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.
Understand Amazon’s Insurance Requirements and Protect Your Future Growth
To cover its risks and yours, Amazon requires certain high-earning businesses to have sellers’ insurance. But even if you fall under that mark, it’s still a good idea to have a liability insurance policy.
Connect with a legal professional to make sure you meet all of Amazon’s insurance requirements. With the right policy in place, you’ll be able to keep your business protected as you scale.
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