Like any big company, Amazon is exposed to lawsuits. From lost sales and personal injury to monopoly and antitrust, they've faced it all, often victoriously. However, many of these lawsuits involve problems they aren't directly responsible for. They're mainly the sellers' fault.
We've all heard stories of skincare products causing burns or toys found to be made with hazardous chemicals. Some of them even make the national headlines. Unfortunately, these cases occur more frequently than you think, and Amazon often bears the brunt of the blame.
This isn't to say Amazon shouldn't take responsibility. They're partly to blame because the existence of these cases means the platform's vetting system has failed. Still, the sellers involved must take their share of the responsibility since their products caused the damages.
Amazon requires some sellers with professional accounts to purchase insurance to protect itself from the cost of product-related lawsuits and, ultimately, ensure that all its products and services meet the highest quality standards.
Other Reasons to Take Out Insurance
Your insurance isn't just to comply with Amazon's requirements. It is also for your own protection. If you've been a seller for a while, you should know by now that Amazon is a buyer-first marketplace. Proof of this is its extremely lenient return policy, which allows buyers to return products for trivial reasons.
If a buyer can get away with returning products for illegitimate reasons—sometimes even fraudulent—who's to say they won't escalate their complaints into a lawsuit when your products cause them harm? Insurance protects you from financial obligations resulting from the harm those products could cause.
Your insurance also protects your customers, not just you and Amazon. Like you, buyers want to take as little risk as possible when shopping on the platform. They prefer products with coverage because they guarantee protection against the costs of potential bodily injury or property damage.
Noteworthy: Another reason to purchase insurance is that Amazon promises to resolve and pay for valid claims against sellers under $1,000. However, there are two conditions: the seller must abide by Amazon's policies and hold the necessary insurance. This means you won’t enjoy this benefit without coverage.
Do all sellers need to have insurance?
No, not all Amazon sellers are required to have insurance; only Professional Sellers and those making $10,000 each month in gross sales. If you've only recently reached $10,000, you must purchase insurance immediately or before you receive Amazon's notice.
Despite this, accidents that may result in injury and property damage may happen no matter how much profit you make monthly. Taking out insurance, even if you're not required, can go a long way in protecting your Amazon business from claims.
What type of insurance do I need?
Amazon requires professional sellers to purchase general liability insurance, also known as business liability insurance. You can choose any or all of these types: commercial general, umbrella, and excess liability insurance.
This insurance protects you and your Amazon business from claims involving bodily injury and property damage caused by using your products, services, or operations. It doesn't cover employee injuries, craft mistakes, or punitive damages.
Consider purchasing other insurance types depending on the type of product you're selling and the risks involved in your operations. Inventory insurance, for instance, protects your inventory from damage or loss. Cargo insurance protects your shipment. If your operations include processing vast amounts of data, you might need cyber liability insurance to protect against data breaches. And so on.
What does Amazon require from your insurance?
Amazon provides a long list of conditions before it accepts your insurance certificate. Your insurance policy must:
- Have at least a $1,000,000 limit per occurrence and in aggregate.
- Cover all liabilities caused by or occurring in conjunction with the operation of your business, including products, products/completed operations, and bodily injury.
- Be either or a combination of three policy types: commercial general, umbrella, or excess liability insurance.
- Be written on an occurrence basis.
- Be provided by a company with global claim handling capability and a financial rating of S&P A- and/or AM Best A- or better (if S&P or AM Best is not valid or used in the country where you are required to obtain insurance, a local equivalent is allowed). This company must give Amazon at least 30 days notice of cancellation, modification, or nonrenewal.
- Include "Amazon.com Services LLC., and its affiliates and assignees" as additional insureds.
- Have a deductible listed on the certificate of insurance.
- Have a deductible not greater than $10,000.
- Cover all sales from products you have listed on the Amazon website.
- Have an insured name that matches the "legal entity" name you provided to Amazon.
- Be completed and signed.
- Be valid for at least 60 days from the date of submission.
What happens if you fail to comply with Amazon's insurance requirements?
Amazon penalizes professional sellers or those earning $10,000 monthly who lack the required insurance. Your account can be suspended until you provide Amazon with a valid certificate of insurance or, worse, deactivated. Read Amazon's rules on insurance in the Terms and Conditions.
How do you submit your insurance documents to Amazon?
Once you have all your insurance documents, upload them on Amazon immediately. Log in to your Amazon Seller account, go to 'Settings,' and select 'Account Info.' Then, click 'Business Insurance,' enter your insurance information, upload your documents, and click 'Submit.'
If Amazon requires a physical copy of your insurance documents, which is very rare, send it to Amazon here: c/o Amazon, P.O. Box 81226, Seattle, WA 98108-1226, Attention: Risk Management. The Risk Management Team might notify you of the status of your submission in a few days to a week.
Using Amazon's Insurance Accelerator
Purchasing general liability insurance is easy, but finding an insurance provider willing to meet Amazon's conditions can be tricky. One option you can look into is Amazon's insurance accelerator. Here, Amazon helps sellers find an insurance provider, get a quote, and get insured fast.
Three of the best insurance providers within Amazon's network are Well Insurance, Next Insurance, and Bunker Insurance. Since Amazon recommends them through its partnership with Marsh, expect a quicker process, as they've already been briefed on the process and what Amazon sellers typically need.
Protect Your Amazon Business with Business Liability Insurance
As a retailer in a buyer-first marketplace like Amazon, you can only assume a limited number of risks. One of these is the possibility of legal claims. Without general liability insurance, a single lawsuit could prove fatal for your brand. Follow the advice on this blog and purchase sufficient coverage for your Amazon business, even if you're not required to do so. Use the Insurance Accelerator for faster search and reliable coverage.