- Last Updated:
- 8/2/2024
- Brianna Hale
Hitting $10,000 in sales in a single month is a huge milestone for many first-time Amazon sellers (or a sign of a good month for the tenured storefronts).
Before you start celebrating, there’s one small catch: you now have 30 days to provide Amazon with proof of product liability insurance.
Understanding the Amazon insurance requirements can sometimes feel like deciphering a secret code, but with Insurance Canopy it’s easier (and more affordable) than you may think!
Overview of Amazon Insurance Requirements for Online Sellers
Your Amazon liability insurance must cover all sales from products you sell on Amazon and meet the following criteria:
- Minimum $1M per occurrence and $1M aggregate policy limits
- Include general liability, product liability, and occurrence form coverage
- By issued by an insurance provider rated A- or better
- List “Amazon.com Services LLC., and its affiliates and assignees” as an additional insured on your policy
- Deductibles cannot exceed $10,000, and all deductibles must be listed on your policy documents
- Insured name on your policy must match the legal entity name you provide to Amazon
- Insurance provider must give Amazon at least a 30-day notice for any cancellation, modification, or nonrenewal of your policy
- Policy must be valid for at least 60 days from the date of submission, signed by you, and completed in its entirety
Insurance Canopy’s Amazon seller’s insurance policy exceeds Amazon’s minimum requirements, making it a great option for those selling on the platform.
General Insurance Requirements for Selling on Amazon
Amazon requires all sellers who make $10,000 or more in gross sales in any month to obtain insurance.
When you sign the seller agreement, you agree to these terms and conditions. You also agree that Amazon will not be liable for a number of reasons including (but not limited to) negligence, product liability, loss of profit, loss of investment, and damages.
This basically means you and your business will be responsible for ALL of the risks and costs if you were to be sued as a result of any of the things listed above. That’s where insurance comes into play!
Types of Insurance Required for Amazon Sellers
Your policy must include general liability insurance, product liability insurance, and additional insureds to help you cover accidents caused by or related to the operation of your business and the sale of your products.
General Liability – Also known as commercial general liability insurance (CGL), this protects your business from lawsuits related to property damage and bodily injury caused by your business operations.
Product Liability – Also known as Products-Completed Operations, this protects your business from lawsuits involving bodily injury caused by the product(s) you sell.
Additional Insured (AI) – This allows you to add third parties to be covered on your policy (like Amazon).
Other types of insurance you may want to consider, but are not required to have, include:
Coverage Limits Required
The minimum coverage limit required by Amazon is $1 million ($1M) per occurrence and $1M aggregate. These limits must apply to your general and product liability coverages. Our base policy includes a $2 million per occurrence and $2 million aggregate limit — double that of Amazon’s minimum requirements — to help protect your business.
$1 million per occurrence minimum – The per occurrence limit applies to the maximum amount the insurance company will pay for any one claim or incident.
$1 million aggregate minimum – The aggregate limit applies to the maximum amount the insurance company will pay out in a policy period (typically 12 months) for all claims combined.
If your existing policy does not meet these limits, you may need to add Excess Liability to your plan. This adds the additional limits you need to meet Amazon’s minimum requirements.
Common Risks Amazon Sellers Face
Selling products online comes with its share of risks that could drain your time, money, and resources if a lawsuit arises. The most common risks stem from manufacturing defects and mislabeling and involve bodily injury or property damage.
Some examples of risks we see include:
- Allergic reactions caused by the materials or ingredients in your product
- Chemical burns caused by the materials or ingredients in your product
- Choking hazards caused by your product
- Bodily injury caused by your product failing (e.g., a TV stand breaking due to structural design problems or a cabinet tipping onto an individual)
- Fire or electric shock caused by products that include some type of electrical elements
Even if you are not at fault, Amazon requires you to take responsibility for any accidents that arise from your products because you placed the faulty product into the marketplace.
That means potentially paying thousands of dollars just to defend your business in court.
Seller-Specific Insurance Requirements
All Amazon sellers with a Pro Merchant account have the same insurance requirements, it does not fluctuate based on your seller type, product type, or gross sales. The requirement only kicks in once your monthly sales surpass the $10K threshold.
Types of sellers affected by the Amazon seller insurance requirements include:
- Individual Sellers
- Professional Sellers
- Fulfilled by Amazon (FBA) Sellers
- Amazon Handmade Sellers
- Brand Owners
- Wholesalers
- Retailers
- Private Label Sellers
No matter the type of seller you are, be mindful of your monthly gross sales. Once you hit $10,000, you’ll need to obtain liability insurance with at least $1 million per occurrence and aggregate coverage, occurrence form coverage, and list Amazon as an additional insured.
When to Choose Higher Limits
Meeting the minimum Amazon liability insurance requirements doesn’t mean your business will automatically be protected from all risks. You could be left with gaps in your coverage.
Depending on the following factors, you might want to consider adding extra coverage to your policy or increasing your limits.
- High-risk products: Some products, like electronics, food, or health-related items, carry a higher risk of injury. You’ll want to ensure you have the right type of coverage and high enough limits to cover the cost of a lawsuit.
- Large sales volume: Your sales volume may increase in price or unit by selling more of a product or by selling a more expensive product. Both scenarios could increase your risk of a costly accident occurring.
- Expanding product line: Adding new products to your storefront means adding new risks to your business. By increasing your coverage limits, you can cover a broader range of liabilities.
- Wholesale or private labeling: Because you have a larger inventory than smaller sellers, it’s best practice to invest in additional liability protection to cover your products.
- Partnership agreements: Entering into partnerships, like with a manufacturer or distributor, often requires you to sign contacts that list their own insurance requirements. Expanding your Amazon insurance can help you meet these extra demands.
How to Submit Your Proof of Insurance to Amazon
Amazon may request a copy of your Certificate of Insurance (COI). This is your proof of insurance and shows you have valid coverage.
If this happens, you can send your COI to the following address: Amazon, P.O. Box 81226, Seattle, WA 98108-1226, Attention: Risk Management
To obtain a copy of your Certificate of Insurance, please contact your account manager directly. They can send you a digital PDF copy of your COI for free!
How to Manage Risks When Selling on Amazon
From dealing with cranky customers to dodging counterfeiters, your Amazon business faces a laundry list of risks every day!
Managing your risks with these tips helps you to steer clear of pitfalls and sail smoothly toward success.
- Obtain insurance that meets the Amazon seller insurance requirements
- Adhere to Amazon’s terms of service, seller guidelines, and performance standards
- Uphold strict quality control
- Regularly inspect your products
- Create detailed and accurate product listings with clear images, detailed descriptions, and informative specifications
- Monitor and promptly respond to all customer feedback, including negative reviews, to generate high customer satisfaction
- Keep thorough financial records to catch financial risks early
- Register your brand with Amazon’s Brand Registry to protect your intellectual property and reduce the risk of counterfeit products
- Consider using Fulfillment by Amazon to decrease operational risks
- Ensure your business is compliant with all applicable laws and regulations
“Starting and operating an Amazon selling business requires significant time, dedication, and financial resources. In the fast-paced world of online selling, where customer reviews and trust are paramount, product liability insurance is the single best way to protect your investment, business, and personal assets.
Insurance not only safeguards your financial stability but also reinforces your commitment to product safety and quality, showing customers that you are serious about ensuring their safety and satisfaction.”
—Daniel Steadman, CPCU, VP of Underwriting and Program Development
Why Choose Insurance Canopy for Amazon Seller Insurance?
Don’t settle for pricey liability insurance when you could have affordable comprehensive excellence!
✔️ Our coverage is customizable to you, letting you build your perfect protection plan with the help of a certified insurance agent.
✔️ We help you easily meet and exceed Amazon’s liability insurance requirements at a price tailored to your business.
✔️ Our policy can cover you beyond the digital listing on Amazon — enjoy 24/7 protection while operating and selling online (including other e-commerce sites), in stores, or at events.
✔️ If we can’t protect your business, we’ll help you find someone else who can. That’s how much we care about you finding the right policy!
Frequently Asked Questions (FAQs)
Does Amazon FBA Require Insurance?
Yes, Amazon FBA requires sellers to have commercial general liability insurance if their gross proceeds exceed $10,000 in any month. The insurance policy must:
- Provide at least $1 million in per occurrence and aggregate coverage limits
- Include both product and general liability insurance
- Have occurrence form coverage
- List Amazon as an additional insured
Am I Required to Have Product Liability Insurance to Sell Handmade Products on Amazon?
You’re required to have product liability insurance to sell handmade products on Amazon if you make over $10,000 in monthly sales.
Whether or not you meet this threshold, the terms and services require you to take responsibility for your products and any claims arising from them.
Do I Need Separate Insurance Policies to Sell on Amazon and Etsy?
No, with Insurance Canopy you do not need separate insurance policies to sell on Amazon and Etsy. One policy will cover you while selling online or in-person in unlimited locations (some location-specific exclusions apply).
Daniel Steadman | VP of Underwriting and Program Development
Daniel Steadman is the Vice President of Underwriting and Program Development for Insurance Canopy.
As an experienced Chartered Property and Casualty Underwriter, Daniel knows what types of coverage risks small business owners face and is committed to creating insurance solutions to help protect them in case of a claim.
Daniel Steadman is the Vice President of Underwriting and Program Development for Insurance Canopy.
As an experienced Chartered Property and Casualty Underwriter, Daniel knows what types of coverage risks small business owners face and is committed to creating insurance solutions to help protect them in case of a claim.
