What is Amazon Insurance?

A Guide to Amazon Seller Insurance

Amazon makes it easy to run online stores and can be a good source of income. However, it's not without risks. Amazon sellers have similar responsibilities as other business owners. If you sell a product on Amazon and a customer is injured or experiences property damage because the product is faulty, you could be liable. Having proper business insurance is essential to protect your business from unexpected claims.

Why Do You Need Amazon Seller Insurance?

Amazon insurance is vital for any business that sells products via the online store, whether you're doing so as a limited company or a sole trader. Product liability insurance protects you if a customer claims for personal injury, property damage, or other losses caused by a faulty product.

When you sell on Amazon, even if you're a drop shipper, you're the person who has legal responsibility if anything goes wrong. This is something many sellers don't realize or often overlook, and it could land them in hot water if a customer claims over a faulty product.

If you're a sole trader without insurance and someone claims against you, you have to pay out of pocket if your business can't cover the costs of the claim. If you're unable to cover the costs yourself, that could adversely affect your credit rating.

Limited companies offer protection against this sort of thing, but if the company can't cover the costs, it may need to be dissolved. Liability insurance helps your business avoid such issues by ensuring you're covered against product liability claims.

What Are the Requirements for Amazon Insurance?

Amazon seller insurance requirements vary depending on the type of account the seller has and the way the products are delivered. Smaller sellers may not be required to have insurance, although it's recommended. Pro Merchants and those who process more than $10,000 in sales each month are required to have small business insurance.

If you're required by Amazon to have insurance, that policy must include general liability insurance and commercial umbrella insurance with a minimum of $1 million per occurrence and an aggregate limit. Commercial umbrella insurance offers an extra layer of protection to help cover claims that exceed the limits of your general liability policy.

Without commercial umbrella insurance, you're required to pay out of pocket for costs that exceed your liability policy limit, such as:

• Medical expenses
• Legal fees
• Property damage
• Judgments and settlements

Commercial umbrella insurance extends the cover of the underlying policy, giving you an extra layer of protection.

The above are basic limits, and many sellers opt to take out other liability policies, depending on the nature of their businesses.

If you're a smaller Amazon seller and you aren't currently required by Amazon to have insurance, it may still be worth considering, especially if you're planning to scale your business. Policies for smaller sellers are quite affordable and offer peace of mind.

What Other Insurance Policies Does an Amazon Seller Need?

For some Amazon sellers, simple product liability coverage is sufficient, especially if the business doesn't have a customer-facing element and they're using Fulfillment By Amazon (FBA) or drop-shipping for product delivery.

Amazon insures FBA inventories for its sellers, so if a product is damaged while at an Amazon warehouse, the company typically reimburses you for that damage. If you're not an FBA seller and you keep your products in a storage unit or at your home, you may need separate insurance to cover this. Home insurance does not usually provide cover for business activities undertaken within the home.

Other liability policies to consider include:

• Commercial auto insurance: If you have a vehicle used to transport inventory or for other business-related purposes, a dedicated commercial policy may be required. Be aware that commercial auto insurance does not typically cover any cargo in the vehicle. You may need a separate form of insurance known as inland marine insurance to protect your inventory if you regularly transport stock in your commercial vehicle.
• Commercial property insurance: Sellers who also maintain a physical store or have other forms of commercial property need to have this form of insurance. This covers the property, tools, equipment, and inventory your business relies on.
• Cyber insurance: Your business most likely handles the personally identifiable information of customers, such as their names, addresses, and payment information. Cyber liability insurance protects your company in the event of data breaches. Some cyber insurance policies may also cover cyber-ransoms. If your company is the victim of a ransomware attack, insurance could help with the cost of the ransom, as well as notifying impacted customers and offering credit monitoring services to mitigate the impact of the attack.
• Workers' compensation insurance: If you have employees, it's important to have this form of coverage, even if those employees work remotely. Workers' compensation insurance is a legal requirement in many states, and it protects your company if one of your employees suffers a work-related injury. Even remote workers could experience repetitive stress injuries or other occupational injuries, and workers' compensation may cover their lost wages and medical expenses.

The insurance policies you need depend on the way your business operates. It's common for public liability insurance to be included as part of a general liability policy, but other policies are only added if they're required.

In addition to the policies listed above, there are some other useful policy options for people who sell online through Amazon and other platforms. Suspension and chargeback policies offer protection against the disruption of having an online marketplace account suspended or the costs of fraudulent chargebacks from customers. These policies are relatively new but incredibly useful for online sellers.

How Much Does Amazon Seller Insurance Cost?

The exact cost of insurance coverage for Amazon sellers depends on the nature of their business. When quoting for an insurance policy, sellers take into account several things, including:

• Business turnover
• The types of products being sold
• The type of selling you do (e.g., drop-shipping/retail arbitrage/your own products)
• Where your products are made
• The level of cover you need
• Whether you need extra coverage, such as commercial auto insurance or cyber insurance

Because there are so many factors to consider when it comes to quoting for online retailer insurance, it's best to speak to an agent or an insurance broker to get personalized advice.

Get a Free Quote for Amazon Insurance

Insurance for Amazon sellers doesn't have to be a confusing process. At Tivly, our goal is to help you understand the coverage you need for your business and find protection as efficiently as possible by matching you with the right insurance provider. If you're considering taking out Amazon seller insurance, simply give us a call at 877-907-5267 or complete the form above and one of our specialists will contact you right away.

Reviewed By: Andrea McKinney, MBA, Licensed Agent

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