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Amazon seller insurance: Image of toy knight by James Pond on Unsplash

Amazon Seller Insurance Requirements

When most sellers first start their Amazon business (myself included), they often don’t realize that if you’re a Pro Merchant Amazon will require you to have liability insurance

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. 

In this post, we’ll be digging into:

  • Why you need insurance to sell on Amazon
  • Amazon’s insurance requirements 
  • What type of insurance you need 
  • Where to get insurance and the cost

 

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.

 

Amazon’s requirements (and where to find this info)

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. 

Pro Merchant Insurance Requirements

Towards the bottom of that list, you will see Pro Merchant Insurance Requirements, which states:

“Pro Merchants who sell on Amazon must provide proof of Commercial General Liability insurance. This insurance, obtained at the merchant’s expense, shall cover up to $1,000,000 per occurrence and in the aggregate and must include product liability, bodily injury, or personal injury, property damage, and other requirements as stated in the Amazon Services Business Solutions Agreement. The insurance must indicate that “Amazon.com, Inc., and its affiliates and assignees” are added as additional insureds.”

This means that if you have an individual seller account, Amazon does not require you to have insurance. (You should probably still have insurance but we’ll get to that in a little bit.)

Timing and transaction requirements

While the Pro Merchant Insurance Requirements page states that Pro Merchants must have insurance, it does not list all of Amazon’s requirements. For a complete list of the insurance requirements, you need to go to the Amazon Services Business Solutions Agreement.

“If the gross proceeds from Your Transactions exceed the applicable Insurance Threshold during each month over any period of three (3) consecutive months, or otherwise if requested by us, then within thirty (30) days thereafter, you will maintain at your expense throughout the remainder of the Term for each applicable Elected Country commercial general, umbrella or excess liability insurance with the Insurance Limits per occurrence and in aggregate covering liabilities caused by or occurring in conjunction with the operation of your business, including products, products/completed operations and bodily injury, with policy(ies) naming Amazon and its assignees as additional insureds. At our request, you will provide to us certificates of insurance for the coverage to the following address: c/o Amazon, P.O. Box 81226, Seattle, WA 98108-1226, Attention: Risk Management.”

This states that if your sales exceed the applicable insurance threshold for three months in a row, Amazon requires you to have insurance. However, in this section, it does not tell you what that threshold is.

Insurance limits and thresholds

Next, scroll down to the ‘Definitions’ section. Then, look for ‘Insurance Limits’ and ‘Insurance Thresholds.’

(An easy way to find each section is to hit control+F on a PC or command+F on a Mac and do a keyword search.)

‘Insurance Limits’ means the applicable one of the following:

  • $1,000,000 CAD, if the ‘Elected Country’ is Canada
  • $10,000,000 MXN, if the ‘Elected Country’ is Mexico
  • $1,000,000 USD, if the ‘Elected Country’ is the United States

‘Insurance Threshold’ means the applicable one of the following:

  • $10,000 CAD, if the ‘Elected Country’ is Canada
  • $100,000 MXN, if the ‘Elected Country’ is Mexico
  • $10,000 USD, if the ‘Elected Country’ is the United States

Basically, this means if your sales are over $10,000 per month for at least three months in a row, 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 insurance do you need 

Amazon requires sellers to have $1M in coverage

You must have Commercial General Liability (CGL), Umbrella and/or Excess Liability Insurance coverage with limits of not 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”

 

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 such as Wells Fargo, Progressive, Geico, etc. to receive quotes (Amazon-specific insurers are listed below).

And because it is largely product liability insurance that is required, your quote will be based on your estimated annual revenue. The average cost is typically around $500-$1,000 per year. 

To easily view quotes from multiple insurance companies, you can use Insureon. They will send you multiple quotes from top carriers to compare. Make sure you let the insurance agent know you are an Amazon seller beforehand though. That will ensure Amazon’s exact requirements are covered. 

Insurance companies specifically for Amazon sellers

Here are a few insurance companies that work specifically with Amazon and eCommerce sellers:

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.

 

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!

 

*Disclaimer: 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. 

 

27 comments on “Amazon Seller Insurance Requirements

  1. Hi Brian – well done article, and thank you for addressing the ‘Individual Seller’ level which is what I’ll be starting out at. Of many articles I gleaned on the net you’re the only one that I came across who addressed this at all. In particular I appreciated your lines:

    ‘This means that if you have an individual seller account, Amazon does not require you to have insurance. (You should probably still have insurance but we’ll get to that in a little bit.)’

    I also appreciate your listing of companies specializing in this – great help!

    Accordingly, I’ll be getting insurance before I make sale one.

    Thanks again!

  2. Am I reading this incorrectly? (I understand you aren’t an attorney nor do you play one on TV…) But under #9 of the TOS, it lists that you are covered until three consecutive months of $10,000 gross in sales. I’m not at that volume (yet!) but am trying to prioritize expenses as a newer seller.

  3. Informative article! Is General Liability of 1M not enough? I would also need to purchase Umbrella and Excess? Received a quote from NEXT Insurance for my ecommerce business but it did not include policies entitled “Umbrella” and “Excess”. I just want to be clear. Thank you!

    1. Hi,

      Amazon states “commercial general, umbrella or excess liability insurance…” so general should be just fine. If you’re not sure, double-check with Amazon.

  4. Great article. high lighted a few of the issues that I was unaware of, that AMZ needs to be added to the insurance document!

    Im a UK based seller – will these insurers in the US be able to help me? If not, could you recommend a specialist UK amazon insurer?

  5. Hi, thank you for the article!
    I’m from Israel and working on products to begin selling soon.

    What would you recommend for insurance?
    An Israeli insurance or one from US?

    Thank you

  6. I am a seller from Europe with a European company and selling on amazon.com. The insurance companies which you listed are making insurance for non-USA residents?

  7. What if I do over the threshold in the US, but also sell in Canada and Mexico through the NARF program, but in those countries my sales do not exceed the thresholds?

  8. I am in the UK and only selling in the UK at the moment. Any advice on where to go here? If I sell in the US in the future, I will follow the above advice.

  9. Hi Brian,
    I am the owner of an Switzerland based LLC and I would like to have a clear recommendation from your side as per what we need to do. At the moment we’re under the 10k$ / month but we expect to grow above that shortly. Obviously I fully understand your article and the possibility of being sued is frightening.
    Your straightforward approach and advise will be highly appreciated.
    Best
    Jordi

  10. Hello Brian & eCommerce Sellers. This is Matt Lovell with WELL Insurance, thank you for including us in the article as a featured eCommerce Insurance Agency. We are here to help US sellers. Please feel free to reach out with any questions on coverage and how it applies to your business specifically. Be Proactive, not Reactive!

    1. Hi Bhavik,

      I am not sure about that. You will need to read through Amazon India’s terms of service to see if that is a requirement.

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