If you haven’t been selling on Amazon, it may be prime time to make the move. From new-third party sellers to seasoned pros, one thing rings true: Amazon is a titan, and it’s not going anywhere soon. However, you may feel confused as to how to make the jump without falling into costly mistakes.
After this blog, you’ll understand the ins and outs of Amazon insurance requirements, and how to make sure you have everything you need to stay covered.
If You Can’t Beat Them, Join Them: The Evolving Landscape of B2C Commerce
There was a time when businesses sought to compete with Amazon more than they do today. “It’s our business,” you’d hear. “The traffic should go to our site,” they’d add. And while there’s merit to all of this, sometimes Goliath is so big you’d prefer to talk it out before casting any more stones.
That’s where many ecommerce companies find themselves today. With approximately 3 billion visits a month and 200 million global Amazon Prime members (metrics that will continue to grow), it’s in the best interest of businesses selling products online to capitalize on this giant’s reach. Let’s explore three primary reasons a business would consider selling its products on Amazon.
#1 Shopping Habits
Consumer expectations and habits change. For instance, most customers expect two-day deliveries — another contribution from Amazon’s global influence. Along with that, habits like where online shoppers are going also change. A little over 98 million users access Amazon’s app every month, and data across the spectrum states the majority of buyers say they’re more likely to buy from Amazon than other ecommerce sites.
Basically, this means more and more people are going to Amazon to shop before they go anywhere else. That means if they find what they’re looking for there, they won’t need another platform.
#2 Be Where Your Audience Is
Since shopping habits change — and that dictates where your audience is — you need to make sure you keep up with the changes. There’s a reason foot traffic dictates the most sought-after retail spaces — you want to be where the people are.
The same is true for ecommerce. The difference is now we’re talking about digital domains and website traffic. Nevertheless, the time-tested principle of relevancy stands firm. And if the vast majority of online shoppers flock first and foremost to Amazon, then it’s in a business’s best interest to be there.
#3 Money on the Table
Not being in the places your audience is leaves revenue on the table. Aaron Marino, the CEO of one of the leading men’s skincare businesses, has recently said that finally making the jump to selling on Amazon has significantly increased their sales.
Some brands may be concerned about diluting their offerings by selling on Amazon. But sometimes the bottom line is the bottom line. Put simply, any business selling a physical product not on Amazon is likely leaving money on the table.
With some of the reasons why you should be on Amazon out of the way, let’s take a look at how to sell smartly by better understanding Amazon seller insurance.
The Necessity of Ecommerce Business Insurance
Any business selling a product or service needs liability insurance. You probably already know this, but liability insurance will ensure you protect your business financially and legally. It will also protect your inventory and employees against supply-chain issues or consumer-related injuries from products. At the very least, every business looking for online retailer insurance should have the following:
For a comprehensive guide on ecommerce insurance that will detail everything your business needs, check out our Ecommerce Business Insurance 101 blog here.
This brings us to Amazon’s insurance requirements. We’ll cover all the pertinent information you need to know to make sure you’re set up for success.
Amazon Insurance Requirements
Amazon requires business insurance for all Pro Merchants (i.e., large-volume sellers), and sellers with over $10,000 in sales a month have small business insurance. Now, whether you’re selling on Amazon or not, you should definitely have comprehensive commercial coverage anyway.
For instance, whether you hit $10,000 in sales in the first quarter or not, the right commercial insurance will protect you from a host of risks, keeping claims from coming directly out of your pocket.
We know not everyone reads the terms of service agreement front to back, but here is an important excerpt straight from Amazon’s terms of service (ToS):
“Commercial General Liability (CGL), Umbrella and/or Excess Liability Insurance coverage with limits of not less than:
$1,000,000 per occurrence, $1,000,000 in the aggregate for products and completed operations, and $1,000,000 in the general aggregate. Such insurance must include products liability, products/completed operations, bodily injury, personal injury, broad form property damage, and broad form contractual coverage.”
You can learn more about Amazon’s ToS here.
Why You Have to Add Amazon as an Additional Insured
Another part of Amazon’s insurance requirements is that they must be listed as additional insured on your policy. This may sound strange, but it’s simply to protect Amazon in case a customer files a lawsuit against them because of an issue with your business.
Since they’re listed as additional insured, your insurance policy would cover the cost to defend them in a lawsuit and pay out any settlements (up to the policy aggregate limit).
Liability Insurance for Amazon Sellers
According to Amazon’s insurance requirements, Pro Merchants must have $1 million in liability coverage, per occurrence and in aggregate. In addition, your policy (or policies) must include the following coverage:
- Product liability
- Bodily injury
- Personal injury
- Broad form property
- Broad form contractual coverage
- Products/complete operations
At Robertson, we can create a custom business owners’ insurance plan that has general liability, product liability, commercial property, and auto insurance rolled into the coverage.
The result? We’ll have all your Amazon liability insurance and Amazon product liability insurance needs covered. This plan would also protect you from the following:
- Damage to your reputation (libel, slander, and more)
- Lawsuits brought on from business enterprises
- Copyright or property infringement issues
- Medical costs for a hurt customer
- Damage to a rental property (including burglary)
Why Ecommerce Insurance Is More Crucial Than Ever
Understanding Amazon’s Insurance Requirements and having an Amazon seller insurance policy is more important than ever. The truth is, the ecommerce marketplace continues to thrive, with a projected $8.1 trillion in sales by 2026. But all this growth will come with inevitable mistakes, and consumers have the flexibility to sue, which means you need to shield your business wherever possible.
If you don’t already have Amazon product liability insurance (among other crucial coverage options we mentioned in this blog), it’s time to get the coverage you need. If you do already have coverage and you haven’t revisited the policy in a few years, we’re here to help.