Amazon Insurance Requirements for FBA Sellers

You’ve picked out your business’s name, purchased your inventory, and established your shipping partners—by almost all accounts, your business is ready to launch. So, what’s missing? 

Depending on your Amazon seller account type, if you’re a seller with a Professional account and your products are Fulfilled by Amazon, you also need to acquire liability insurance.

Fulfilled by Amazon sellers, or FBA sellers, partner with Amazon both to list their products on Amazon websites and to store and deliver their products to the customer. To meet the requirements as an FBA seller, you’ll need to learn the ins and outs of seller insurance, what kind of business insurance you need, and how much is enough to protect your business.

What Is Amazon Seller Insurance?

Amazon seller insurance refers to Amazon’s new liability insurance requirements for all sellers who earn over a certain threshold to purchase independent liability insurance.

If you’re an FBA seller, you benefit from the ease of having Amazon pick, pack, and ship your orders for you. To gain these benefits, however, you also need to comply with Amazon’s insurance requirements. Requiring sellers to carry insurance helps the company to protect its brand, reputation, customer experience, and warehouse functionality.  

While this additional step might seem like an obstacle in the path to setting up your FBA seller account, sellers actually benefit from fulfilling this insurance requirement.

This is because Amazon will cover the cost of all property damage and personal injury claims under $1,000 for sellers with valid insurance—and that covers 80% of all claims on Amazon.

Amazon insurance requirements typically only apply to businesses that sell more than $10,000 per month, unless otherwise requested. If you sell less than that amount, you may not be required to carry general liability insurance, but it’s probably still a smart business move. Protecting your business through liability insurance can go a long way toward protecting your enterprise as a whole. 

Another question you might consider is, do you need an LLC to sell on Amazon? Read more on the benefits of setting up and LLC as an Amazon FBA in our latest blog. 

What Are the Benefits of Having Insurance as an Amazon Seller?

Insurance can help to protect you against major hardships legally attributed to your products or business. This could include product safety, packaging security, and harm to your products’ users and property. 

If a product fails or arrives damaged, then the solution is usually to send a replacement to the customer as soon as possible. But what if a customer uses the product and is injured by a product defect? 

From exploding cell phones to expired coffee, product liability lawsuits can seek damages that roam into millions of dollars, including:

• Medical bills, including surgeries and long-term medical support
• Property damage to homes, cars, and other possessions
• Pain and suffering
• Lost wages and lost potential income
• Punitive damages

Product liability insurance is a prime way to protect yourself if a lawsuit occurs. This liability coverage typically covers: 

• Legal representation 
• Negotiation, including settlement offers and consideration
• Payment of settlements up to the amount of insurance coverage

Liability insurance can protect your business from a financial storm that your budget can’t handle, the same way homeowner’s insurance protects individuals from losing their property to damage caused by fires, floods, and tornadoes. 

Amazon Seller Insurance Requirements

To fulfill Amazon seller insurance requirements, businesses must follow certain processes and take out policies that meet specific criteria. 

As an FBA seller, it’s important to understand all the factors involved—including the policy requirements, how to find the right insurance company, and how the process works.

Policy Requirements

You’ll want to select an insurance provider or broker who is familiar with Amazon business policies to write yours. There is no official Amazon FBA insurance category among providers, but your policy should meet these standards:

• A policy coverage limit minimum of $1 million 
• The limit must be per occurrence
• The deductible must be less than $10,000
• It must cover all products you have listed in the Amazon marketplace
• You must purchase insurance in your country of origin
• The policy type can be commercial general liability (GGL), umbrella, or excess liability

The policy must cover all liability applicable to your business, including:

• Products liability
• Bodily injury
• Personal injury
• Property damage
• Products/complete operations
• Broad form property damage
• Broad form contractual coverage

The insured's listed must also: 

• Match the legal entity name you provide to Amazon
• Include Amazon as an additional insured 

Finally, you’ll need to provide a certificate of insurance that lists: 

• The deductible amount
• Any persons and property covered
• The coverage amount
• Exclusions

Finding an Insurance Company

You can select the insurance provider of your choice, but having a provider who is familiar with both e-commerce policies and FBA insurance requirements will be helpful. Per Amazon requirements, your provider must have:

• Global claim handling capabilities
• A financial rating of S&P A-, AM Best A-, or higher

Fortunately, you don’t have to navigate the search on your own. Amazon also provides help in locating a provider through the Amazon Insurance Accelerator, accessible through Seller Central. This program provides a list of competitive liability insurance providers who are approved to insure FBA businesses. 

Process Requirements

Amazon insurance guidelines also include notification and timing details as follows. Your insurance must meet the following process requirements:

• You must notify Amazon of policy cancellation or modification at least 30 days prior to the change.

• The policy must be signed and valid within 60 days of submitting details to Amazon.

• Certificate of insurance must be uploaded to Seller Central within 30 days.

Amazon’s full insurance policy details are laid out under “Pro Merchant Insurance Requirements” on the “Program Policy” help page.

Ensure Your Business’s Future Success with Forum Brands

If you’re ready to ditch the checklists, Amazon FBA tax filing, and oversight needed to keep your e-commerce business on track, consider how you’ll ultimately leverage your established FBA business. 

Ongoing sales is your bread and butter, but the gold at the end of the rainbow is converting your company to a cash payout. 

When you sell your Amazon FBA to Forum Brands, you can fund your next investment, your retirement savings, or even a new business idea. We are uniquely situated to understand the value of FBA businesses and appreciate what you’ve grown and accomplished—and we’re ready to step in with a cash offer for your company.

Sources: 

Amazon Seller Central. Selling Services Terms. https://sellercentral.amazon.com/gp/help/external/201484410?language=en_US&ref=efph_201484410_cont_201484560

Amazon Seller Central. Expanding A-to-z Guarantee to protect customers and sellers (US). https://sellercentral.amazon.com/forums/t/expanding-a-to-z-guarantee-to-protect-customers-and-sellers-us/891493

Amazon Seller Central. Amazon Services Business Solutions Agreement. https://sellercentral.amazon.com/gp/help/external/G1791?language=en_US

Helium 10. Insurance Requirements For Amazon Sellers: FAQ’s. https://www.helium10.com/blog/amazon-seller-insurance-requirements/

Next Insurance. Everything you need to know about Amazon insurance requirements. https://www.nextinsurance.com/blog/everything-you-need-to-know-about-amazon-seller-insurance/

About Amazon. A-to-Z Guarantee to cover property damage and personal injury. https://www.aboutamazon.com/news/how-amazon-works/new-a-to-z-guarantee-better-protects-amazon-customers-and-sellers

Forbes Adviser. How To Get Product Liability Insurance.https://www.forbes.com/advisor/business-insurance/product-liability-insurance/