What Business Insurance do I need to sell on Amazon?

What Business Insurance do I need to sell on Amazon?

Do Amazon Marketplace Sellers need Insurance?

All Amazon Sellers and online businesses should consider some form of business insurance.

While it is often the case that some online retailers are more streamlined than other businesses, for instance, you are a solo operation with no employees. From an insurance perspective, the simplicity does makes life a little easier.

There's no need for employers liability cover and your exposure to Public Liability claims is greatly reduced to that of a High Street shop.

We still recommend that any business take out a Public Liability policy, of course as you may have visitors to your premises and/or off site meetings with suppliers.

Still, as an online business that is in no way public-facing, you have a significantly lower risk than other businesses and will often have a lower premium.

Your main areas of concern come down to Product Liability, stock, goods-in-transit, buildings, cyber liability and contents cover.

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What is Product Liability?

Products Liability Insurance cover will protect you if a claim is made against your company for either bodily injury, death or property damage caused by a product that you have supplied, manufactured or designed.

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

Where you have purchased products liability protection your insurers will help you manage the claim and will then seek to reclaim their losses from your supplier or manufacturer – this process is known as subrogation.  

As outlined below, as part of sellers agreement with Amazon, you will have agreed to have held them completely “harmless” to any litigation, therefore the need for support from a quality business insurer is highly recommended.

In most cases, it is the manufacturer that will ultimately be found liable for damages in the event of a claim. However, there are some cases where it may be deemed as your fault:

  • 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.

Do you need Product Liability to be an Amazon Seller?

If you are what they call a "pro merchant" on Amazon's UK site, it comes highly recommended that you have commercial general liability insurance for your own business.

This will primarily be concerned with Product Liability Insurance, but when 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 subsequent compensation fees should someone make a claim against you.

We urge that you read their UK agreement yourself and/or ask your legal advisor to review with you, before entering into any arrangement with Amazon.

If you process your products' sales through the Fulfilment by Amazon (FBA) services on the UK site, you may be required to have cover.

If gross sales/proceeds exceed £4,000 per month for over 3 consecutive months, you will be required to purchase your own third-party liability cover with an indemnity limit of at least £400,000.

This cover must include Products Liability cover, specifically with cover for bodily injury, and your policy must name Amazon and assignees as additional insureds.

Does Amazon Specify How Much Liability Cover You Need?

For UK sellers, Amazon specifies that you should have £400,000 minimum Indemnity, (as at January 2021) if your FBA service passes the insurance threshold as mentioned above.

All Insync Products Liability Insurance policies for Online Retailers come with a minimum sum insured of £1,000,000 which 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 Have Cover?

It is written within Amazon's terms of service that you must provide your insurance certificates as proof of sufficient cover should they ask to see them - and they really do ask, so keep your documents in a safe place so that you can furnish them immediately to avoid any downtime from the Amazon marketplace.

With the changes that follow the UK leaving the EU, it has become more important than ever that you carry valid Product Liability Insurance 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, who then stores and distributes them from their warehouse rather than managing this yourself.

There are many pros and cons to this, the biggest pro being that you can take advantage of distributing your products through Amazon Prime.

However, if you choose this - does Amazon insure your FBA inventory while storing it at their warehouse? What if there is a flood or a fire in their building? Are you protected?

The short answer is yes, if your items are damaged at Amazon's warehouse they will usually reimburse you for those damages & this should be included in your specific contract.

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 but distribute through an FBA inventory.

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

As has been mentioned, the agreement specifically states that if your sales exceed more than £4,000 a month for three consecutive months via their FBA services, then you must have third-party liability cover.

This means:

  • If selling in the UK and, for three months in a row, sales exceed £4,000 per month, the seller needs to obtain Public & Products Liability Insurance for the agreement's duration.  
  • The Policy needs to include Products Liability Cover (including bodily injury claims from third parties)
  • The minimum cover level required is £400,000 for the UK 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.
  • On request, Amazon may ask for insurance to be arranged regardless of the threshold.
  • On request, Amazon may ask for a copy of the Public & Products Liability Insurance to be sent to them at the address noted.
  • If the seller sells on multiple country sites, insurance needs to reflect each site.  

Although “Insurance” requirements relate to FBA Sellers only, ALL Amazon sellers agree to render Amazon “harmless” as part of the sellers' agreement.

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 (i.e. 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?

Similarly, while Amazon would reimburse their FBA sellers following a fire at their warehouse that wiped out most of your stock - that 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 element. 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.

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Marine Cargo / Goods-In-Transit Insurance

Even though you may be using Amazon fulfilment, chances are you may be responsible for your goods from the point of origin (e.g. the Manufacturer in China) until they reach the Amazon distribution centre.

Freight and cargo operators will often offer insurance with each shipment, but if you are sending regular containers it is definitely worth investigating your own marine cargo insurance policy.

In addition, we would recommend checking your contract with any suppliers to ascertain at what point you are responsible for any goods.  

More information on Cargo Insurance can be found 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, business and computer equipment, contents, stock insurance and 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 will also apply to other online marketplaces that you sell through including your own website or APP.

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.

Contact our team at Insync to get your quote for Amazon Seller Insurance today. Click Get a Quote or call us at 01200 309516.

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