Amazon Seller Insurance: Requirements, Coverage, and Cost Breakdown

When you need it, what's included, and how to find a provider.

Apr 24, 2024

"Wait, I need insurance?"

We remember first realizing our little Amazon business needed insurance and feeling so irrationally intimidated by it. It seemed like such a "big kid" concept that couldn't possibly apply to our little side hustle. But lo and behold, Amazon was requiring us to get it.

Understanding the specific requirements, what this insurance covers, and how much it typically costs can give you a bit of confidence when searching for quotes and nailing down the coverage for your Amazon business at any stage, really.

With this post, we'll cover what you need to know when it comes to Amazon seller insurance and how to decide what coverage you need.

Intro to Amazon Seller Insurance

Why Does Every Amazon Seller Need Insurance?

Here's the thing about Amazon Seller Insurance: it isn't just about complying with Amazon's rules—it's a genuine need to protect your business. Imagine a customer gets injured using your product, or there's a lawsuit alleging that your product caused property damage. Without insurance, you could be facing huge out-of-pocket costs that could cripple your business.

Side note: This is another reason to properly setup your business entity and not run it as an individual.

Amazon Seller Insurance can act as a safety net, covering legal fees and damages up to the policy limit. This means you focus on growing your Amazon business, rather than worrying about potential financial disasters. Plus, if you're in wholesale, occassionally you'll get a supplier that asks if you have insurance. Not carrying insurance would be a red flag to say the least.

Basics of Amazon Seller Insurance

Amazon Seller Insurance is essentially a Commercial General Liability (CGL) policy. It's designed to protect Amazon sellers from financial losses related to their business activities. This type of insurance typically covers legal fees, settlements, and medical expenses if someone is harmed by a product you sell. It also covers you in case of property damage claims.

To meet Amazon's requirements, your policy must have at least $1 million in coverage per occurrence, including product liability and bodily injury. The insurance must be valid globally and list “Amazon.com Services LLC., and its affiliates and assignees” as additional insureds.

It's important to understand that Amazon will not cover these liabilities, so having your own insurance is crucial from a risk management perspective as you operate your business on their platform.

Note: Always check Amazon's Seller Insurance Policy for the latest requirements.

Requirements for Amazon Seller Insurance

Understanding Amazon's Requirements

Amazon mandates that sellers who exceed $10,000 in monthly sales obtain insurance.

The policy needs at least $1 million in coverage for each occurrence, covering liabilities such as products, operations, and bodily injuries.
This insurance must be an occurrence-based policy, not a claims-made policy, meaning it covers incidents that occur during the policy period, regardless of when the claim is filed.
The insurer must be rated A- or better, capable of handling claims worldwide.

Details like the deductible, which cannot exceed $10,000, and the need for the policy to name Amazon as an additional insured, are also part of the requirements. You need to review these requirements and make sure your policy complies, as failure to do so could result in your seller account being suspended.

Common Misconceptions

There are several myths or misconceptions our there about Amazon's insurance requirements.

A common one is that only large sellers need insurance. In reality, once you cross the $10,000 sales threshold, insurance becomes a requirement, no matter the size of your business.
Another misunderstanding is that Amazon will protect sellers from all liabilities, which is not true. Something like Amazon's A-to-Z Guarantee may cover claims under $1,000, but beyond that, sellers are responsible for damages and legal fees.
Some sellers also mistakenly believe that their homeowner's insurance will cover their Amazon business; however, commercial activity typically requires a separate policy.
Lastly, there's the false assumption that obtaining insurance is a complex and costly process. It's actually very straightforward, and the cost of insurance is relatively small compared to the financial protection it offers.

What Amazon Seller Insurance Covers

Typical Coverages in Amazon Seller Insurance

Amazon Seller Insurance generally includes a range of coverages to protect your business.

The most important is product liability, which shields you if a product you sell causes harm or injury. This coverage usually includes both legal defense costs and any settlements or judgments against you.
Another key coverage is bodily injury and property damage, which provides protection if someone is hurt or their property is damaged as a result of your business operations.
Your policy may also cover personal and advertising injury claims, such as slander or copyright infringement.
It's also common for these policies to cover the costs associated with legal defense, regardless of the outcome of the claim.

Some policies may provide coverage for inventory loss due to theft, damage, or other disasters, which adds an extra layer of security for your physical assets. Beyond Amazon's policy, we can't tell you what you need covered. That's a personal decision you will have to make based on what you're selling and your risk tolerance. But understanding these coverages can help you choose the right policy for your business.

Breaking Down the Cost of Amazon Seller Insurance

How Much Does Amazon Business Insurance Typically Cost?

The big question for those with limited funds will of course be, "How much is Amazon business insurance?" The answer can vary, but typically, the annual premium for Amazon Seller Insurance ranges from $500 to $1,000.

Factors influencing the cost include your product categories, estimated annual revenue, and the risks associated with your products. For instance, electronics might carry higher premiums due to their potential hazards (e.g., lithium batteries go boom) compared to more benign goods like clothing. Some insurance providers offer policies starting at around $300 per year, particularly for lower-risk businesses.

Honestly, given the potential financial risks of operating without insurance, this cost is relatively minor—especially as you operate at a much larger scale. Keep in mind that this is an investment in your business's longevity, and skimping on coverage to save on premiums could cost you way more in the long run.

Other Cost Factors

Beyond the base premium, there are additional factors that can influence the cost of your Amazon Seller Insurance. Quite frankly, we doubt it will sway costs by much, but just listing for the sake of it.

Your business's claims history can play a role—if you've had previous claims, insurers may view your business as higher risk, leading to increased premiums.
Your experience in the market and the length of time you've been selling on Amazon may also be considered, with more established sellers sometimes receiving more favorable rates.

Two other super obvious ones, but listing anyway:

The level of deductible you choose can affect your costs; a higher deductible typically results in lower premiums, but it means you'll pay more out of pocket if a claim arises.
The specific terms and conditions of your policy, such as coverage limits and exclusions, can impact the cost (no duh).

Choosing the Right Amazon Seller Insurance

How to Choose Your Amazon Insurance Provider

Do not just search for a business insurance provider. You want to find someone that specifically has experience dealing with Amazon, as they will know Amazon's requirements and get you the right documentation for Amazon. Also check the insurer's reputation and financial stability. Look for companies with strong ratings from agencies like S&P or AM Best.

Of course, review the policy details, such as coverage limits, deductibles, and exclusions, to make sure they align with your risk profile. Some policies may offer extra features or add-ons that could be beneficial. Lastly, compare quotes from multiple insurers to find the best coverage at a competitive price.

Popular Insurance Providers for Amazon Sellers

These are not endorsements of any of these insurance providers. However, below are some of the more popular companies we've seen for Amazon seller insurance:

Assureful
Well Insurance
Next Insurance
Bunker Insurance

Amazon will also push their "Amazon Insurance Accelerator" program. The program will basically push you to Marsh, which is a site that aggregates quotes from insurance providers (including the ones above). In our opinion, this is a pretty safe way to find a provider and will likely be the best route for most newer sellers.

Disclaimer: This guide is intended to provide general information about Amazon Seller Insurance. It is not legal or financial advice and should not be taken as such. Always consult with a qualified legal or financial professional before making decisions related to insurance and risk management for your business. The author and publisher are not liable for any outcomes resulting from decisions made based on information provided here.

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