Your Guide to Amazon Seller Insurance

With the right Amazon sellers insurance package, you and your business are safe from the costs associated with third-party lawsuits. Obtaining comprehensive solutions can be tricky without prior knowledge, so why not let us do the hard work for you?

You’ll find everything you need to know about Amazon seller insurance, including how we can help you acquire the perfect policy bundle.


Product Liability Insurance Coverage for Amazon Sellers

Amazon requires all sellers to carry insurance. The requirement extends to FBA (Fulfillment by Amazon) and FBM (Fulfillment by Merchant) companies.

Product liability coverage is made for businesses that sell, distribute, or manufacture items. Whether you’re a brick-and-mortar store, online wholesaler or e-commerce company, you must acquire protection against claims alleging third-party bodily injury and property damage caused by your products.


Common Amazon Sellers Insurance Claims

Understanding the importance of Amazon seller insurance may come easier after considering a few real-world claims examples:


Example One: Property Damage Claim

You sell kitchen supplies. Penelope buys a popular coffee machine from your store. Unbeknownst to Penelope, the device is defective and causes a fire in her kitchen. Luckily, nobody was hurt, but the product damaged her property.

Penelope sues you for damages related to the coffee machine’s defect. Your product liability policy covers the cost to repair her damaged kitchen.


Example Two: Bodily Injury Claim

Your business sells bicycles on Amazon. Your customer, Sam, buys a bike and rides it to work the next day. Unfortunately, the wheel comes loose, and Sam falls, fracturing his elbow and suffering a concussion.

Sam sues you for the medical expenses associated with the fall. Your comprehensive insurance package kicks in to cover the costs related to his injuries.


Example Three: Data Breach Claim

Your network housing your customers’ sensitive information is hacked. The hackers steal all your customers’ financial data, causing costly lawsuits and restoration fees.

Luckily, your cyber liability policy covered the total costs of the data breach lawsuits and repairing the technology hacked during the attack.


Do You Need Insurance to Sell Products on Amazon?

September 1, 2021, saw Amazon update their insurance requirements. The result? All sellers who make over $10,000 in monthly sales must acquire a liability insurance policy that meets this criterion:

  • At least $1 million USD limit — Your coverage must have at least a $1 million per occurrence limit and in aggregate that protects business operations, bodily injury, property damage, and products. It can be a CGL policy, excess liability, or umbrella policy.
  • Additional insureds — When you purchase an insurance policy, include Amazon as an additional insured. It provides a level of protection if they’re named in a lawsuit against products bought via their website.
  • Coverage proof — Generally speaking, Amazon won’t directly ask you to provide proof of insurance. However, if such a situation occurs, you must be prepared to send your certificate insurance to the Seattle headquarters.

No matter what kind of Amazon seller you are (e.g., private label seller, retail shop, wholesaler), safeguarding your business with comprehensive insurance is vital for survival.


What Does Amazon Seller Insurance Cover?

Most comprehensive Amazon sellers insurance packages come with at least a few of the following policies:


Product Liability Insurance Coverage

As an Amazon seller, obtaining product liability insurance is essential to survival. It’s often included in your commercial general liability policy. However, some businesses may need higher limits and seek a standalone agreement.

The policy protects your company from claims alleging third-party bodily injury or property damage caused by your product (food and beverages included). It tends to cover medical bills and legal defence costs arising from the lawsuit regardless of its outcome.

Choosing LiabilityCover to find the perfect product liability insurance coverage guarantees that you work with a broker with extensive experience offering policies to Amazon sellers. They’ll build a package that ensures protection from all angles.


Commercial General Liability Insurance (CGL) Coverage

Commercial general liability insurance or CGL protects your business against third-party property damage claims and bodily injury.

At first glance, you might think your mostly online-based business doesn’t need this coverage. But, there are plenty of situations where CGL can help you as an Amazon seller, including:

  • Trade shows, kiosks, and events to help boost sales through in-person channels
  • Landlord requirements (e.g., to rent office space)
  • Distribution contracts as needed by Amazon’s updated insurance requirements

We often refer to commercial general liability insurance as the starting point for business protection. However, product liability coverage pulls slightly ahead of it in this case.


Cyber Liability Insurance Coverage

Cyber liability insurance is perhaps one of the most important coverages for your Amazon selling or e-commerce business, particularly if you store your customers’ information.

As a general rule, you need this type of insurance if at least one of the following applies:

  • You use cloud or computer systems to store information.
  • You provide hardware- or software-related services to your customers.
  • You use a point-of-sale system.
  • You hold your clients’ financial data.

The coverage pays for legal costs and settlement fees associated with these areas:

  • System business interruption — The policy reimburses you for any losses sustained while your system was down following a cyber event.
  • Restoration of systems — It gives you the money you need to repair and restore any computer systems harmed during a cyberattack.
  • Forensic, legal, and breach management — The policy covers the costs related to notifying your customers of the attack, managing the crisis, providing credit monitoring services, and obtaining legal advice.
  • Incident response — It ensures you have access to a 24/7 cyber incident response unit. They’ll help coordinate your response plan after a cyberattack.

You could benefit from a social engineering policy endorsement, depending on your business model. It’s extra coverage that protects you if an employee is tricked into sending money to a fraudster’s account or providing system access.


Commercial Property Insurance Coverage

You need commercial property insurance if you:

  • keep your inventory in a warehouse or other location.
  • have a brick-and-mortar store.
  • conduct business activities from your house.

Not only does the policy protect the physical building, but it also protects its contents, including stock. Generally speaking, the insured risks are fires, floods, vandalism, and thefts.

On top of that, you can add business interruption insurance coverage. The endorsement reimburses any income you lose after an insured event. Some policies also cover employee wages, overhead costs (i.e., water and electricity), and other ongoing costs of temporarily shutting your company.

Although, it’s worth noting that they don’t cover any income you lose during events like government-mandated closures, pandemics, or infectious diseases.


Commercial Auto Insurance Coverage

Commercial auto insurance provides similar cover to your personal auto policy, but it’s necessary for business-related driving.

While you likely don’t have a “company car” as an Amazon seller, it pays for expenses incurred in an accident when driving for business reasons, including:

  • Driving to mail a shipment to your customer
  • Driving to meet a new distributor
  • Transporting inventory between two warehouses or storage units

Specifically, policies tend to cover:

  • Accident benefits — If you’re injured in a vehicular accident, this policy clause pays for rehabilitation and medical bills, regardless of fault. You can increase this section of the policy by talking to your assigned broker.
  • Uninsured auto — If you have an accident with an uninsured driver, it covers your vehicle damage.
  • Third-party liability — The policy offers protection if you’re at fault for killing or harming somebody or their property.
  • DCPD — Direct compensation-property damage covers your car and its contents (e.g., dash cams, dashboard systems).


Amazon Suspension Insurance

Compared to the other insurance policies we’ve discussed, Amazon suspension insurance is pretty new to the marketplace. It isn’t mandatory, but it can certainly help.

The coverage compensates you for any losses you incur while your Amazon account is suspended. As suspension periods can be rather long-winded, it ensures your business can remain open following the temporary hiccup.


How Much Does Amazon Seller Insurance Coverage Cost?

You should anticipate spending between $1,000 and $3,000 annually for a basic commercial general liability policy with a $2 million limit. But keep in mind that your particular premium price changes depending on factors, such as:

  • The number of employees — The more people you employ, the more likely somebody will make a mistake that results in a claim. Thus, your insurer raises your premium.
  • The type of products you sell — Some products come with more risk exposures than others. For example, selling chemical cleaning agents is riskier than distributing spatulas.
  • Your business’ location — Different areas of Canada come with higher crime or adverse weather condition rates. If you run a business from one of these locations, you should expect a higher insurance premium. The following cities have exceptionally high crime rates, and thus, potentially pricier insurance coverage:
    • Hamilton, Ontario
    • Regina, Saskatchewan
    • Brampton, Ontario
    • Winnipeg, Manitoba
    • North Bay, Ontario
    • Sault Ste. Marie, Ontario
    • Sudbury, Ontario
    • Red Deer, Alberta
    • Lethbridge, Alberta
    • Surrey, British Columbia
  • Your experience — You’re less likely to make mistakes the more experience you have. Therefore, you benefit from lower insurance premiums the longer you stay in the business.
  • Your yearly and projected revenue — A highly profitable business has more at stake during third-party lawsuits. You’re more likely to be hit with high settlements if the other party knows your revenue can handle it.
  • Your insurance claims history — A clean insurance claims record stands you in good stead for lower premiums.


Why Choose LiabilityCover For Your Amazon Seller Insurance?

  • Personalized solutions — We understand that your business is unique. So, we connect you with brokers who provide bespoke solutions to guarantee complete protection.
  • Dedicated team — Our expert team ensures accuracy when analyzing your insurance requirements.
  • Easy access — We’ve made finding the right provider as simple as completing one short inquiry form.
  • Leading insurers — We work with Canada’s best insurance suppliers who have experience providing policies to Amazon sellers like you.


Frequently Asked Questions


Does Amazon Sellers Insurance Coverage Protect All The Products You Sell?

A comprehensive, tailored Amazon sellers insurance package is specially designed to cover all the products you sell, manufacturer, design, or distribute. Typically, it provides protection from unexpected incidents, including third-party property damage, bodily injury and legal fees.


How Much Amazon Seller Insurance Coverage Do You Need?

Since all businesses are unique, there’s no one-size-fits-all answer here. Amazon sellers face various risks depending on their storage facilities (e.g. warehouse), the types of products they sell, and their office location.

Complete our short request form to assess your risk profile and figure out the insurance coverage types your Amazon business requires.


Why Shouldn’t You Take Out $1 Million in Liability Insurance?

These days, $1 million is no longer sufficient for covering the entirety of liability claims. Just one accident could end up costing more than $1 million. Not to mention that Amazon’s US requirements necessitate a $1 million USD limit, meaning $1 million CAD won’t meet the criteria due to exchange rates.


Does Amazon Sellers Insurance Cover Global Sales?

Yes, you can purchase insurance to cover domestic and global sales. However, you must state the portion of your sales from every country when you complete the insurance application. Don’t worry; your assigned broker will help you do that to ensure accuracy.


Does Amazon Cover Any Claims?

Yes, Amazon covers claims under $1,000. They resolve and pay for successful personal injury and property damage cases against sellers less than $1,000 as a concession to customers.

If your case fits the above, Amazon won’t seek reimbursement from you, provided you follow their policies and hold the necessary insurance coverages. Thankfully, the concessions won’t affect your order defect metric.


How Do You Get Amazon Sellers Insurance Coverage?

With LiabilityCover, it’s easy to get the coverage you need. Follow the steps below:

  1. Please complete the request form on our website.
  2. We’ll review your insurance requirements.
  3. We connect you to one of the best licensed specialist insurers in the country. Whichever broker we assign will have extensive experience providing Amazon sellers insurance coverage.
  4. The broker or agent contacts you to guide you through the acquisition process!