If you have a big dream and something to sell, selling on Amazon can put you in front of millions of potential customers, could get cash flowing quickly, and help you stand out even among the most well-known brands and merchants.
Since it’s an online business, you may think all you need is a computer, smartphone, and some packing and shipping supplies. Right?
In many cases, you are also required to have general liability insurance. And in all cases, it’s something you should strongly consider.
On September 1st, 2021, Amazon began requiring certain sellers to carry general liability insurance (GL). We’ll break down exactly what you’ll need in a bit, but let’s start with why you need it.
General liability insurance can help protect businesses — large and small — against losses and liabilities. Amazon wants to protect its business as well as yours. When you realize that third-party sellers account for 58% of Amazon sales, your business is a big deal to them.
“OK, but I just sell several dozen handmade dog toys a month. Do I really need to get coverage?”
Here are the specific requirements from Amazon. It’s a good chunk of well-crafted legal writing. But simply, if you have an Amazon Professional Seller Plan and those dog toys are bringing in $10,000 or more in monthly, you’re required to have general liability insurance.
But risk and accidents don’t necessarily just occur above a certain sales level. Even if just one of those dog toys was defective and caused some harm to a family pet, you could potentially be sued. (And not to worry — no actual dogs were harmed in this example.).
Without insurance, you could be responsible for any financial settlement and legal costs as well.
You’re an online seller. We’re insurance people. We all likely love dogs. We can help you understand what coverage you need, how to find it, and how to get it for an affordable price.
For Professional Sellers doing more than $10,000 per month in business, you’ll need at least GL insurance coverage for up to $1 million for any one incident or claim, and up to $1 million over the length of the policy.
Product liability arises if something you made or sold causes bodily injury or property damage. This is an area of risk for any business--online or off--, so it’s important to make sure the GL coverage you get includes product liability protection.
As we mentioned earlier, Amazon requires you to add them as an “Additional Insured” on your Certificate of Insurance (COI).
That’s something to keep in mind as you’re looking for quotes from different insurance providers.
Once you submit your Certificate of Insurance to Amazon to show that you’re insured, you need to hold insurance as long as you remain a Professional Seller on Amazon. Amazon wants to be sure their sellers maintain the proper coverage, so at minimum, you must carry a valid policy for 180 days.
Keep in mind that since Amazon is listed as an Additional Insured on your COI, they typically get a notification if your insurance policy is canceled for any reason.
That may sound a bit like a line from a law school textbook, but it’s not that complicated and is extremely important to ensure you’re covered if an incident arises. Your business’s name must match the legal entity you provided to Amazon when you signed up for their Professional Selling Plan.
Most insurers ask you for both your name and your business’s name, so this will likely happen as part of your insurance purchase process.
If that feels like a lot of boxes to check off, we can simplify things a bit. We can help you find a commercial general liability policy that covers Amazon’s requirements. For instance:
Our ecommerce business insurance options offer up to $1 million for any one incident or claim, and up to $2 million over the length of the policy, which exceeds Amazon's current requirements.
Our general liability coverage meets the insurance requirements set out by Amazon.
We can add Amazon immediately as an Additional Insured as part of your quote and include them on your COI.
We offer the convenience of fee-free monthly installment plans and $0 deductible plans, where applicable.
Here’s even better news. We often can do all that with rates as low as $19.58/mo.* Click to get started!
Now that you understand a bit more about the insurance that Amazon requires for Professional Sellers, you may be wondering what else might make sense for an online business like yours.
When you think about a cyberattack, you probably jump to news stories about big corporations and government agencies. While small businesses may not get as much coverage in the press, they get considerable attention from bad guys on the internet.
According to a 2018 report, 67% of businesses with fewer than 1,000 employees have experienced a cyberattack, and 58% reported a breach.
Those types of incidents can have serious effects. The same report found that 60% of small businesses could go under due to a cyberattack.
Online sellers can be tempting targets, as they can be vulnerable to online attacks, hacks, data breaches, and more.
And not all cyber criminals are looking to steal something. Some may encrypt information on your computer so you can’t access it. Others may launch a Denial of Service (DoS) attack that can prevent customers from accessing your website (and your business). Then they can potentially demand ransom money to release your site or your files.
Just as there are different kinds of cyber threats, there are different protections available in many cyber coverage policies. Exactly what is covered in a cyber policy can differ among insurers, so here are general areas to consider that are recommended by the Federal Trade Commission (FTC):
When it comes to what your cyber coverage should provide, the FTC suggests:
We can get your business covered with cyber insurance in just 60 seconds.
As your online business grows, you’ll likely need some help getting all those orders out the door. If you employ at least one person (even on a part-time basis), you may need workers compensation coverage.
Most states require you to carry this policy when you hire your first employee. That can include full-time and part-time employees, as well as subcontractors, so it’s worth knowing the specific requirements in the state where you operate.
If one of your employees gets injured or sick while working for you, workers compensation covers the costs of lost wages, medical bills, rehabilitation expenses, and even death benefits.
Workers compensation coverage also gives you more peace of mind, as it prevents an employee from suing your business for workplace injuries.
The internet has made it very easy for consumers to compare products and prices. That includes business insurance.
One of the results of having access to so much information is that you’ll likely see insurance policy prices that vary significantly. It has nothing to do with you, but everything to do with how business insurance companies work.
Insurance companies specialize in covering certain types of businesses. This usually means that a policy provider is more comfortable covering online businesses, or has more experience with them, than other insurers.
In those instances, their policy prices will usually be less than a provider who doesn’t typically cover that type of business.
If you’re looking to save time and make it easier for insurance companies to compete for your business, we can help.
Check out our fast and easy-to-use quote comparison tool! Just enter a few details about your business, and we’ll provide you with quotes from insurers who can likely provide insurance coverage for your online store.
We also can answer any questions you may have along the way. Just call 855-708-2131 to speak to one of our licensed insurance agents.
As we noted at the beginning of this article, selling on Amazon has opened up the door to making a small business work for millions of people. As supporters of small businesses, we love that.
We work with thousands of small business owners, and we know that even a small business can throw some big challenges at you. So, whether it’s helpful information from our blog or fast, easy-to-get quotes for your business insurance, we’re here to help — and to keep things simple.
*Monthly payment calculations (i) do not include initial premium down payment and (ii) may vary by state, insurance provider, and nature of your business. Averages based on January - March 2023 data of 10% of our total policies sold.
As a 9-year-old at summer camp, I hated it — especially after being pulled screaming from the pool during the swimming competition. While this left me without an aquatic achievement patch, it also inspired the letter to my parents that got me an early release from Camp Willard. That showed me the power of writing. I’ve done my best to use it only for good ever since, such as writing helpful articles for small business owners.
Ed writes on a number of topics such as liability insurance, small business funding, and employee management.
This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer
*Harborway Insurance policies are underwritten by Spinnaker Insurance Company and reinsured by Munich Re, an A+ (Superior) rated insurance carrier by AM Best. Harborway Insurance is a brand name of Harborway Insurance Agency, LLC, a licensed insurance producer in all 50 states and the District of Columbia. California license #6004217.