online business for amazon

What are the Amazon seller insurance requirements?

All Amazon Sellers and online businesses should consider some form of business insurance even if it’s not demanded by the Amazon Seller insurance requirements. Often online retailers are more streamlined than other businesses. For instance, consider you are a solo operation with no employees. From an insurance perspective, this makes life a little easier.

Your main areas of concern come down to:

  • Product Liability
  • Stock and contents
  • Goods-in-transit
  • Buildings
  • Cyber liability

What is Product Liability?

Products Liability will protect you if a customer claims against your company for:

  • Bodily injury
  • Death
  • Property damage

caused by a product you have supplied, manufactured or designed.

If you are the seller, you will be the first port of call for many claimants. While the fault may not lie directly with you, the claimant’s lawyers will look to you in the first instance.

What is subrogation?

Subrogation is where your insurers will help you manage a claim under your Products Liability, and then seek to reclaim their losses from your supplier or manufacturer.

As part of the seller’s agreement, you will have agreed to hold Amazon completely “harmless” to any litigation. Therefore the need for support from a quality business insurer is highly recommended.

In most cases, a court will find the manufacturer liable for damages in case of a claim. However, there are some cases where the fault will be found with the seller:

  • You are the supplier AND manufacturer/designer.
  • The manufacturer cannot be traced, and the trail ends with you.
  • You have rebranded some white-label products.
  • There was an issue with the instructions you provided or published on your product page.

Is product liability in the amazon seller Insurance Requirements?

If you are what they call a “pro merchant” on Amazon UK, we recommend considering commercial general liability insurance. This will primarily be concerned with Product Liability Insurance. However, will generally also include Public Liability cover as standard.

Amazon’s seller agreement renders them completely free of liability if someone makes a claim/lawsuit against you. Therefore, it is 100% your responsibility to cover legal costs and compensation fees should someone make a claim against you.

We urge that you read their UK agreement yourself or ask your legal advisor to review it with you.

Is Insurance a Seller Requirement for fulfilment by Amazon (FBA)?

If you sell through the FBA services on the UK site, Amazon may require you to have cover. If gross sales exceed £4,000 per month for over 3 consecutive months, you must purchase liability cover with a minimum indemnity limit of £400,000.

This cover must include the Products Liability cover. Furthermore, your policy must name Amazon and assignees as additional insureds.

Does Amazon specify how much liability cover you need?

Insync Products Liability policies for online retailers come with a minimum sum insured of £1,000,000. This exceeds Amazon’s minimum threshold. Higher limits are also available on request.

All Insync policies can also include Amazon and assignees as additional insureds. Giving you peace of mind that you’re fully meeting all Amazon FBA requirements.

Does Amazon check if you meet the seller’s insurance requirements?

Amazon’s terms of service specify that you must provide your insurance certificates as proof of sufficient cover. As part of the agreement, they can ask to see these at any time. To avoid downtime, keep your documents in a safe, convenient place to produce if they ask.

Following leaving the EU, it’s more important than ever to carry valid Product Liability for goods moving in and out of EU countries.

Does amazon insure my FBA inventory?

FBA stands for “Fulfilled by Amazon”. This means that you send your products to Amazon, which then store and distribute them from their warehouse. There are many pros and cons to this. The biggest pro being that you can take advantage of distributing your products through Amazon Prime.

Does Amazon insure your FBA inventory while storing it at their warehouse? What if there is a flood or a fire in their building?

The short answer is yes. If your items are damaged at Amazon’s warehouse, Amazon will usually reimburse you for those damages.

However, those are not the only risks of distributing a physical product. Amazon does not provide your protection as a manufacturer, designer or supplier.

For instance, someone makes a claim against you for injuries caused by a product that you manufacture. While you distributed through FBA, Amazon will not cover the costs of the claim. Your Products Liability policy will cover the legal costs and compensation payouts up to the limit of your indemnity.

Amazon will not cover the legal fees or injury claims award of such a claim as they are not liable.

What this means for UK Amazon Sellers:

  • If sales exceed £4,000pm for three consecutive months, the seller needs to obtain Public & Products Liability Insurance.
  • The Policy needs to include Products Liability Cover (including bodily injury claims from third parties)
  • The minimum cover level required is £400,000 on a per claim and in the aggregate basis (for the policy term). Most policies Insync arrange for Amazon sellers offer £1m cover as a minimum.
  • The Policy should specifically name Amazon as an additional insured.
  • You may be asked by Amazon to arrange insurance regardless of the threshold.
  • On request, Amazon may ask for a copy of the Public & Products Liability Insurance.
  • If the seller sells on multiple country sites, insurance needs to reflect each site.

While only FBA Sellers are required to have cover, ALL Amazon sellers agree to render Amazon “harmless”. Therefore, all Amazon sellers should consider covering their business activities.

It is for this very reason that we recommend that all sellers purchase adequate Products Liability Insurance.

The only exception is where the claim relates solely to the product fulfilment on an FBA transaction. For example, if someone was injured from the packaging & it was completed by Amazon, that obviously cannot be held against the seller.

What about business interruption insurance for Amazon FBA?

While Amazon would reimburse their FBA sellers following an incident at their warehouse that wiped out their stock – this won’t necessarily cover your loss of income.

For instance, you run a classic toy company online and use an FBA inventory to remove your business’s storage and distribution elements. However, one night the Amazon warehouse your products are stored in suffers a terrible fire which damages almost all your stock.

While Amazon will return the losses on those products, they won’t cover your losses during the rebuilding of your business. Your assets have now dwindled to a fraction of what they used to be, and classic toys of quality are hard to come by!

During this time, this is where a strong Business Interruption policy will come in handy to protect your cash flow and fixed costs.

Marine Cargo / Goods-In-Transit Insurance

Even if you are using Amazon FBA, you will still be responsible for your goods until they reach the Amazon distribution centre. Similarly, if you are shipping your products yourself, you will need to consider cover.

Freight and cargo operators will often offer insurance with each shipment. If you are sending regular containers, consider exploring your own marine cargo insurance policy.

In addition, we would recommend checking your contract with suppliers to learn at what point you are responsible for any goods. Find more information on Cargo Insurance on our website.

What is Amazon Seller Insurance?

An Amazon Seller insurance policy is a bespoke business insurance policy for the typical types of insurance an Amazon Seller will need. This will usually include options for:

  • Public Liability & Product Liability Insurance
  • Equipment
  • Contents
  • Stock
  • Business interruption insurance

Having a strong Amazon Seller Policy in place will give you the peace of mind you deserve while running your business. While generally called an Amazon Seller Insurance policy, the cover can also apply to other online marketplaces.

This information is correct as of February 2021 for the UK Amazon site. Make sure to read the latest Amazon Seller agreement for your area before becoming a seller.

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