Amazon Seller Insurance – The Ultimate Guide
Business insurance is about as exciting as watching paint dry but unfortunately, it’s a necessary evil, like attorneys, taxes, and mosquitoes.
Most Amazon sellers have no idea they are required to carry Amazon seller insurance if they meet certain criteria, and proof of such must be provided to Amazon.
This fact is often not mentioned in how to sell on Amazon courses and trainings. It is in Amazon’s terms of service but most sellers don’t read those terms to find out if they need insurance coverage.
I can’t blame them because that page is miles long and reads like a copy of War And Peace.
Even though most sellers are required by Amazon to carry general liability insurance and provide proof of such, it is a good idea even if you are one of the few sellers that aren’t required.
It only takes one lawsuit from a disgruntled customer to put you out of business. Every business needs product liability insurance to protect you from losing everything.
Without it, you also risk permanent suspension of your Amazon seller account. Liability insurance policies are usually not expensive and definitely not worth the risk of being uninsured just to save a few dollars.
Remember the hoverboard craze on Amazon several years ago that ended up causing home fires? That lawsuit was costly and I certainly hope those sellers had valid insurance.
So in this post, I’m going to cover the following:
- Does Amazon require sellers to have insurance?
- Amazon seller insurance requirements – What kind of insurance coverage do Amazon sellers need?
- How much is insurance for Amazon sellers?
- What are the best insurance policies to get for selling on Amazon?
Does Amazon require sellers to have insurance?
If you are on the professional selling plan with your Amazon business, that’s the one that charges $39.99 per month, and you have exceeded $10,000 in sales in any month since you started, then you are required to carry and provide proof of insurance.
At the time I wrote this post, they do not require insurance to sell on Amazon if you have never exceeded $10,000 in sales in any month.
You should check the Amazon insurance requirements annually as they are notorious for making changes and not notifying sellers.
Amazon seller insurance requirements – What kind of insurance coverage do Amazon sellers need?
- At least $1 million dollars in coverage per occurrence and in aggregate
- The policy type must be commercial general, umbrella or excess liability, and written on an occurrence basis
- The policy must name Amazon.com Services LLC and its affiliates and assignees as additional insureds
- Unless you are a single member LLC, your insured name on the policy must match the legal business name you provided Amazon in Seller Central
- The coverage you choose must be located in the same country as the address you provided as your business address in Seller Central
- You must add Amazon as an additional insured party on the policy
- After securing a policy, the provider must give Amazon a copy of the Amazon insurance certificate of coverage in Seller Central
How much does Amazon seller insurance cost?
This will vary significantly depending primarily on the following 3 factors:
Type of products sold – Coverage for high risk categories such as nutritional supplements, food, skin care will be cost much more than low risk categories such as home décor, crafts and games.
Annual gross sales – The higher your sales, the higher your risk since that translates to more customers using your products. Lower sales mean the opposite so liability insurance companies use total sales as a factor as well.
Age of business – Businesses with a long track record of no issues with liability claims will be able to secure lower rates than brand-new businesses with no history.
I’ve had the privilege of working with hundreds of Amazon sellers and from my experience, sellers can expect to pay anywhere from $100 per month for low risk products all the way up to $1,000 per month for high risk products.
I know that’s a broad range but unfortunately, the only way to know for certain is to reach out to a provider, supply them with some basic information about your products and get a quote.
Your insurance cost will vary significantly based on these factors as well as the insurance provider you choose.
What are the best liability insurance policies to purchase?
There are a lot of options for various insurance companies but not many that specialize in insuring e-commerce businesses like Amazon sellers.
When you are ready to get insurance for your e-commerce business, you will have some options for just the required coverage amount, or you can purchase excess liability insurance as well as umbrella insurance for other possible legal issues you might want to seek protection from.
Unless you have a large warehouse and employees, you probably won’t need commercial auto insurance or property insurance.
Be sure to get your certificate of insurance immediately after purchasing Amazon liability insurance so you can provide it through your Amazon Seller Central dashboard.
I have been selling on Amazon since 2013 and I shop around every few years to make sure I’m getting the best rates.
In my experience, here are the top 2. They both offer coverage for amazon and e-commerce sellers.
Embroker
Embroker has been the least expensive option for Amazon seller insurance. This may or may not be the case for you as it depends on what products you sell and your physical location, but they should definitely be your first stop.
I like that they offer several coverage options like cyber and data breach insurance which is essential if you also sell products on your own website.
They also offer worker’s compensation insurance if you have employees.
StartSure
Startsure not only offers product liability coverage, but also inventory insurance.
If you have a successful Amazon business, you are probably spending thousands of dollars on every product order.
It’s nice to know you have coverage if something happens to it on the way from China or in Amazon or some 3rd party warehouse that stores it.
They also offer cyber coverage for your e-commerce website.
Conclusion
Amazon’s insurance requirements aren’t unreasonable. Commercial liability insurance should be required from all sellers in my opinion.
They are taking a big risk by letting you sell your own products on their platform without really knowing the ins and outs of your business operations.
It doesn’t take long to get a quote for small business insurance for Amazon sellers since you can submit everything online.
Sometimes you can contact insurance companies and get an instant quote but often, It can take a few days, so don’t wait until the last minute.
If you are required to carry general liability insurance coverage, every day you wait is another day of a potential lawsuit so be sure to get covered fast.
