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Amazon is a leading online marketplace, and with this position comes a set of unique challenges.
As an Amazon seller, whether you are just starting out or you're a pro who has been at it for years, it is important to protect yourself and your business with business insurance.
Amazon requires that some sellers get insurance coverage for selling on the platform.
In this article, we will cover all you need to know about Amazon seller insurance including:
Amazon Seller Insurance is designed to protect sellers operating on Amazon's platform from various risks and liabilities associated with their business operations. From product liability to shipping mishaps, unforeseen events can pose significant financial threats to sellers. Having appropriate insurance coverage can provide peace of mind and reduce potential losses. It is a requirement for Pro Merchants selling on Amazon. The insurance provides coverage for expenses like accidents, injuries, and lawsuits that may occur while selling on the platform.
Amazon announced that from September 1st, 2021, sellers who reach $10,000 in monthly sales must get insurance on their inventory and transactions. In previous years, Seller insurance was only compulsory for sellers who earned $10,000 for three months consecutively.
Amazon requires that sellers with a Pro Merchant account and monthly sales of $10,000 or more get insurance.
However, it is important to get insurance as an Amazon seller whether you are new or experienced.
You may wonder, does Amazon have your back if something goes wrong? The answer is no.
Amazon doesn't want to take responsibility for any damages. It is up to you to get protection for yourself, your assets, and any financial obligation that may come from accidents or injuries.
While the chances of getting a lawsuit from a customer are low, it is always best to be prepared for any unforeseen circumstance that may arise.
For example, a customer may sue you for a faulty blender that blew up their face. They may require that you cover for their injuries. In a situation like this, Seller insurance, such as general liability or product liability coverage, can help mitigate the financial burden associated with legal fees, or settlements, arising from such claims.
As an Amazon seller, your Amazon business represents a substantial investment of time, effort, and capital. Without adequate insurance protection, the threat of unexpected events such as natural disasters, cyberattacks, or supply chain disruptions can be a huge threat. Business interruption insurance and cyber liability coverage, among others, can play a critical role in safeguarding against financial losses stemming from these unforeseen circumstances.
Displaying proof of insurance coverage can significantly increase your credibility as an Amazon seller. In a competitive marketplace like Amazon, where consumers have tons of options at their fingertips, demonstrating a commitment to protecting their interests can set you apart from the competition. Also, having your customers know that their purchases are backed by insurance can instill confidence, potentially leading to increased sales and positive reviews.
Various types of Seller Insurance are available to online retailers. These insurance types extend beyond the Amazon platform. Here are a few types of seller insurance in ecommerce:
This type of insurance is the most common form of insurance coverage Amazon sellers utilize. For Amazon sellers, who often source products from various suppliers and manufacturers, product liability insurance is essential. It provides coverage in case a customer alleges that a product caused them harm, whether due to defects, inadequate warnings, improper instructions, etc. This Amazon Seller Insurance cost can cover financial obligations due to product defects leading to personal injury or property damage.
General liability insurance is a common type of business insurance. It is similar to Product liability insurance, however, this insurance policy extends to services. For Amazon sellers, this insurance is crucial as it protects against lawsuits from incidents such as slip-and-fall accidents related to products or claims of false advertising. General liability insurance can help cover legal fees, settlements, and judgments, providing financial protection and peace of mind to sellers.
The Amazon suspension insurance is a relatively new form of coverage. Amazon does not require this policy, however, it is a good idea to extract a policy for this. If your Amazon Seller Central account gets suspended, your insurance company can cover the monetary expenses, protecting you from the impact of your losses.
Professional liability insurance, also known as errors and omissions insurance, can be great for Amazon sellers who provide consulting services, advice, or expertise related to their products. This type of insurance protects businesses from claims of negligence, errors, or omissions in the services provided. For example, if a seller offers guidance on product usage and a customer suffers damages as a result, professional liability insurance can help cover the costs of defending against the claim and any resulting settlements or judgments.
Shipping accidents are real and can impact cash flow significantly. This is why it is important to consider shipping and cargo insurance. Cargo insurance provides coverage for loss or damage to goods during transit. As an Amazon seller involved in importing or exporting products, cargo insurance is essential to protect against risks such as theft, damage, or loss of shipments in transit.
When you lose stock during transit, your insurance company could take the responsibility of negotiations with transportation firms in the case of damages. If you want to choose shipping insurance for your Amazon FBA business, you must decide which products must be insured. You also need to understand the timings and filing process and check which products can and cannot be covered. Some agencies may not cover certain products, so it’s important to find out which products your preferred agency can cover.
Cyber insurance can protect your business from the financial consequences of data breaches, cyberattacks, and other cyber incidents. In an era where cyber threats are increasingly prevalent, cyber insurance is critical for an Amazon seller who stores sensitive customer data, processes online transactions, and relies on digital platforms for operations. This type of insurance helps cover expenses such as data breach notification costs, legal fees, forensic investigations, etc
Here are the Amazon Seller Insurance requirements you need to adhere to. It is important to take note of them to ensure you get a valid insurance policy.
Amazon requires that Pro Merchants take out policies that have at least a $1 million liability coverage. This coverage should be for every occurrence and in aggregate. Your policy or policies should include coverage for the following:
The policy type could be commercial general, umbrella, or excess liability insurance. In addition, they must be written on an occurrence basis.
Your insurance provider must have a global capability to handle claims. They must also have a star rating of A- or better.
Next, Amazon requires that you include ‘Amazon.com Services LLC’ and their assignees as additional insured on your policy. In simple terms, what this means is that Amazon will have coverage. If someone sues Amazon because of your product, Amazon will have protection. Your insurance policy will help pay for any settlement as well as the cost to defend them in any lawsuit.
Amazon might require that a seller provide a certificate of insurance as proof of coverage. In this case, the seller will need to send the document to the Amazon headquarters in Seattle with the address ‘P.O. Box 81226, Seattle, WA 98108-1226.’
Take note that your insured name must match that of your “legal entity” on your Amazon account. If it doesn’t match, your certificate of insurance (COI) will not be accepted. It may also lead to the suspension of your account.
You can check out Amazon program policies for more requirements and expectations before you get started.
Yes, Amazon’s seller protection policy states that it will be covering claims under $1000 without requesting any reimbursement from the seller. This is under the condition that the seller follows Amazon's policies and holds valid insurance. This policy is designed to cover more than 80% of lawsuits in the marketplace, ensuring that sellers who comply with the policies and have valid insurance are not held responsible for these costs.
Amazon Seller Insurance costs vary depending on the provider and the coverage. Amazon Seller Insurance cost could be between $500 and $2000 every year. However, you may find some providers that offer policies as low as $300 per year. High-risk products typically command higher premiums.
Amazon sellers can also opt for a pay-as-you-sell insurance model, which adjusts the premium based on the exact number of units sold. This approach offers more accurate pricing and better cash flow management for Amazon businesses.
When selecting an insurance policy for your Amazon business, you want to consider the following factors:
Amazon Seller Insurance is an important component for sellers on the platform as it protects against potential liabilities. However, there are several misconceptions surrounding this insurance that can lead to confusion and missed opportunities for sellers to protect their businesses effectively. Here are a few of these misconceptions:
It's a common belief that product liability insurance automatically covers all products sold. However, not all products or situations may be covered. You may require additional approvals for high-risk items like children's toys, consumables, or electronics. As an Amazon seller, you need to take out time to understand your policy thoroughly to ensure coverage for new high-risk items.
While insurance premiums can vary depending on factors such as coverage limits and deductibles, the cost of not having insurance can be far greater. A single lawsuit or product recall could result in significant financial losses that could have been mitigated with the right insurance coverage.
The belief that only sellers with high sales volumes need product liability insurance is incorrect. According to Amazon's requirements, sellers are required to purchase commercial product liability insurance within 30 days after exceeding US$10,000 in gross proceeds in sales in one month on Amazon.com or if otherwise requested by Amazon.
The line between physical and digital products can sometimes blur. You may assume that your Amazon seller insurance will only cover physical goods, but some product liability policies extend to digital products like software. As an Amazon seller, you want to take the time to understand what types of products are covered by your specific policy.
You can choose your insurance providers but you must ensure that the policy follows Amazon’s requirements.
You can use platforms like Insureon to view and compare quotes from different carriers.
Amazon has also launched a new Insurance accelerator. They partnered with Marsh to offer a network of vetted insurance providers.
This makes it easy for sellers to obtain the best Amazon seller insurance at an affordable price.
Some insurance companies that work specifically with Amazon and other ecommerce sellers include Next Insurance, Well Insurance, and Bunker Insurance.
Using these insurance companies is beneficial as they understand exactly what type of coverage an Amazon seller needs.
Sometimes there are unforeseen circumstances that could be detrimental to your business as an Amazon seller. It is important to get insurance for your Amazon business and give it the needed protection. With valid insurance, you can increase company sales and grow revenue with Amazon having peace of mind.
You’ve probably already considered selling on Amazon but its way easier than you think.
Call Us Now