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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. 

 

6 comments on “Amazon Seller Insurance Requirements

  1. 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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