Do You Have the Right eCommerce Liability Insurance for Amazon?
Jul 21, 2022
When was the last time that you bought something off of Amazon? You don’t need to answer that if the delivery person knocked on your door as you were reading this.
Not only are more and more of us buying on sites like Amazon, but we’re selling our products on these sites as well. If you are already an eCommerce vendor using Amazon, you know the magic that they’ve provided to businesses exactly like yours. Whether they’re products that we design and create ourselves, products that we manufacture in larger facilities, or goods that we bring in from overseas - sites like Amazon have given us a great option for reaching the public.
While Amazon is enjoying unparalleled success, they are also aware of the exposure that comes from having so many vendors on the platform. That is why their insurance requirements, which formerly were often ignored, are now strongly enforced.
So what sort of insurance coverage do you need if you want to sell online?
A vendor’s insurance requirements
As Amazon began to welcome more and more third-party vendors, they maintained a requirement that vendors carry eCommerce liability insurance, but did not often confirm that vendors had this insurance in place. Previously, the requirement was that vendors who earned $10,000 in sales during three consecutive months needed to carry liability insurance, and even then Amazon did little to enforce this policy.
Now, though, vendors who earn $10,000 per month in any given month are required to carry product liability insurance for their eCommerce business. Even if most of your months are slower, if you have one hot month of over $10,000, then you are now required to carry product liability insurance.
Larger vendors were likely already carrying this coverage, and presumably had needed it for services other than Amazon. For smaller vendors though who hadn’t previously carried insurance, they’ll now need to make sure that their business is properly protected.
What does Amazon require for product liability insurance?
So what is a company like Amazon looking for when it comes to eCommerce liability insurance?
Amount of coverage
Amazon is requiring eCommerce vendors who surpass that $10,000 threshold to carry at least $1 million in product liability insurance. Recent reports from some vendors have noted that Amazon has already reached out to them requiring proof of insurance even if they haven’t yet surpassed the $10,000/month mark, so it is always smart to carry product liability insurance when selling products online.
Types of Insurance
Amazon is specifically looking for product liability coverage which can come on its own, as an addition to commercial general liability insurance, or under some sort of umbrella policy. They will also want to see coverage for property damage, for bodily injury, and for personal injury as well. These levels of coverage can go beyond a basic commercial general liability policy so it is important to review your coverage and add as necessary.
Other specifications for Amazon’s insurance requirements
Amazon is requiring that these insurance policies:
- Include all products listed for sale on their website;
- List Amazon (their formal corporate name) as well as all of their affiliates as additional insured parties;
- Have capacity to handle global claims; and
- Have a deductible below $10,000.
Amazon is requiring vendors to provide a certificate of insurance (COI) that shows that they are carrying a policy that meets their requirements. If the policy is cancelled, both the policy holder as well as the insurance provider need to provide formal notice to Amazon.
Why is this happening?
The simple answer is liability. Amazon carries a tremendous amount of liability by allowing third-party vendors to openly sell through their platform. If those products are damaged, defective, or even worse dangerous - Amazon has legal exposure. Since Amazon is known for being an incredibly successful company, they’re known for having ‘deep pockets,’ and worry about being seen as an easy target for lawsuits.
It is also important to note that Amazon is not alone in these concerns. Other third-party retail websites such as Walmart and Etsy have also brought in similar requirements to protect their own interests.
How does this help you?
While this may seem like just another piece of business administration, this coverage is important for anywhere you sell your products! The product liability policies that you take out for Amazon can also extend to protect you through your own website, through the local farmer’s market, or anywhere else that you sell your goods.
Anyone who sells products is at some degree of risk, and product liability can be a nightmare for a small business owner. The right insurance package will protect your business as well as a company like Amazon’s, and ensures that you’re both secure in case someone files a legal claim.
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