Amazon Seller Insurance Requirements

On August 10 2021, Amazon changed its requirement for sellers mandating that a business or sole proprietor selling on Amazon.com are now required to take out insurance once they reach US$10,000 in sales in one month on Amazon.com.

Whereas previously, the threshold for insurance was US$10,000 in sales for three consecutive months, which was rarely enforced.

Amazon explained:

“Amazon has a long-standing requirement that sellers obtain product liability insurance and name Amazon as an additional insured once they reach $10,000 in sales for three consecutive months on Amazon. We are updating this requirement and effective September 1, 2021, our Business Solutions Agreement will require sellers to obtain product liability insurance and name Amazon as an additional insured once you reach $10,000 in sales in one month on Amazon.com.

If you are a new seller or are an existing seller looking for a new policy, we have worked with an insurance broker to create Amazon Insurance Accelerator, a network of vetted insurance providers to help you easily and affordably secure liability insurance. These insurers can evaluate and if appropriate, offer liability insurance at competitive rates to qualifying sellers. We will continue to expand Amazon Insurance Accelerator to include more providers over time. You can learn more and contact the providers here. If you already have insurance, please confirm it is up-to-date and saved on the Business Insurance page in Seller Central.

Expanding A-to-z Guarantee to protect customers and sellers

Amazon’s recent press announcement and notification to sellers “expanding A-to-z Guarantee to protect customers and sellers” is not relating to refunds (a primary concern of sellers) but is regarding property damage or personal injury to a customer relating to an item you have sold.

Amazon has amended their policy on the type of insurance you, as a third-party seller, are required to have, which has taken some sellers by surprise. They either didn’t realize they were required to have insurance or thought they were exempt because they are not in the United States.

The threshold or requirement for needing this type of insurance has been lowered to once you reach US$10,000 in sales in any given month on Amazon.com.

How claims are done on Amazon.com

“A customer may make a claim under the A-to-z Claim Process by contacting customer service. We will work with independent claim adjusters to gather information and attempt to filter out fraudulent, abusive or frivolous claims. We will then notify you of claims we believe may be valid. Resolution of those claims depends on the amount of the claim and whether you have updated proof of the commercial liability insurance required by the Amazon Services Business Solutions Agreement”.

The key section you need to be aware of in the lengthy ‘Amazon Services Business Solutions Agreement’ is ‘Section 9. Insurance’.

A seller now must add Amazon, their affiliates, and assignees as additional insured parties. The threshold is now US$10,000 in sales in one month on Amazon.com. Previously it was gross sales of US$10,000 over three consecutive months (equating to approximately US$334 per day in sales).

9. Insurance

“If the gross proceeds of Your Transactions exceed the insurance applicable Threshold during each month over any period of three (3) consecutive months, or otherwise if requested by us, then within thirty (30) days thereafter, you will maintain at your expense through the remainder of the Term for each applicable Elected Country commercial general, umbrella or excess liability insurance with the Insurance Limits per occurrence and in aggregate covering liabilities caused by or occurring in conjunction with the operation of your business, including products, products/completed operations and bodily injury, with policy(ies) naming Amazon and its assignees as additional insureds. At our request, you will provide to us certificates of insurance for the coverage to the following address: c/o Amazon. P.O. Box 81226, Seattle, WA 98108-1226, Attention Risk Management”.

Making it easier for sellers, claims of US$1,000 or less will be resolved by Amazon, but only if you provide proof of insurance:

“For customer claims of US$1,000 or less, Amazon will resolve the claim through a concession to the customer and will not require reimbursement from you or your insurer if you provide proof of insurance”.

But, if you don’t have insurance, Amazon can still request that from you for claims of just US$1,000.

• Third-party sellers need to ensure that they get insurance on file with Amazon.

• If you are required to have insurance (according to Amazon’s threshold) or Amazon request you obtain insurance, and you do not provide proof within 7 days, they will expect you to reimburse for any concession they grant to the customer to resolve their claim.

• Amazon can enforce this by withholding funds from your disbursements that equal the amount of the concession. However, if you disagree with the claim, you have 30 days to appeal.

For customer claims above US$1,000

“For customer claims above $1,000, you or your insurer must handle the claim directly with the customer. If you have provided proof of your insurance to Amazon through the Business Insurance page, we will notify you of the claim and transfer the claim directly to your insurer for handling. Otherwise, we will notify you of the claim directly, and you must respond to our notice within 7 days”.

Once you’ve resolved a claim, you need to provide Amazon with a signed agreement stating there is no more liability for you or Amazon and that everything has been resolved.

However, if you do not cooperate or the claim is taking too long to be resolved, Amazon can resolve it for the customer. Then you will be liable for the resolution that was given to the customer by Amazon.

“If you are required to have insurance or we request that you obtain insurance and you do not provide proof of coverage within 7 days after we notify you of a claim, we will expect you to reimburse us for any concession we grant to the customer to resolve their claim. In addition, we may withhold funds from your disbursements in the amount of the concession. If you disagree with our decision to provide a concession to the customer, you can dispute the concession by submitting an appeal within 30 days. Your appeal should include any information that you think would be relevant to our review of the claim, such as evidence that your product was not defective or did not cause the customer’s injury or damage”.

FREQUENTLY ASKED QUESTIONS

Who does this apply to?

All sellers on Amazon.com. Effective from September 1, 2021, once a seller reaches US$10,000 in sales in any given month, they are required to obtain product liability insurance and name Amazon as an additional insured.

“Amazon has a long-standing requirement that sellers obtain product liability insurance and name Amazon as an additional insured once they reach $10,000 in sales for three consecutive months on Amazon. We are updating this requirement and effective September 1, 2021, our Business Solutions Agreement will require sellers to obtain product liability insurance and name Amazon as an additional insured once you reach $10,000 in sales in one month on Amazon.com”.

Why do I need insurance?

The reason behind this rule is straightforward. To protect yourself/your company’s assets and cover any financial obligations resulting from accidents, injuries, or litigation.

While the chances of a customer suing you may be low, it’s better to err on the side of caution and adhere to Amazon’s rules. Have peace of mind so you can focus on growing your business!

What type of insurance do I need?

Amazon requires sellers to have US$1 million in coverage. 

You must have 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 may also satisfy the insurance limits by using any combination of Commercial General Liability and Umbrella and/or Excess Liability insurance. However, if you do this, the required ‘Additional Insured’ wording must be as follows:

“Amazon.com, Inc., its affiliates and assignees are additional insureds, as their interests may appear”.

Amazon states: “Please contact your insurer to add ‘Amazon.com Services LLC and its affiliates and assignees’ with address ‘P.O. Box 81226, Seattle, WA 98108-1226’ as an additional insured”.

Can I take out my own insurance?

Yes, as long as it meets Amazon’s insurance requirements, you can take out your own insurance, with your preferred insurance provider.

Can Azure Risk provide insurance to meet Amazon’s requirements?

In short, yes. Azure Risk and its partners can make it easier and affordable for sellers registered in Hong Kong, Singapore and Thailand selling on any Amazon marketplace to obtain insurance.

I’m not based in the United States, and how do I get the insurance Amazon requires?

Azure Risk can assist you to obtain your insurance in your local country and ensure it has a global product liability rider. (Note: Your provider must have global claim handling capability and an “A” rating from S&P and/or AM Best or better. A local equivalent is allowed if those ratings aren’t valid in your country.)

Once I obtain insurance, what else do I need to do?

You need to upload proof of insurance to Amazon. Once you obtain insurance, upload your Certificate of Insurance to Seller Central. You can get the Certificate of Insurance from whichever provider you get insurance from.

I’m new to selling on Amazon and don’t expect to reach the threshold soon. Should I be doing anything?

Even new Amazon businesses would benefit from inquiring about resale insurance now so that when you hit Amazon’s ‘insurance threshold’, we can have your policy up and running right away.

What types of claims are eligible for this process?

Only valid property damage or personal injury claims that can be proven to have been caused by a defective product are eligible for this process. It will not cover any property damage or personal injury resulting from the use of a product that is not defective.

Is Amazon going to charge me for claims under US$1,000?

No. As long as you have insurance, Amazon will handle and pay valid claims under US$1,000, which according to their data, make up 80% of claims filed.

“Amazon will resolve and pay for valid property damage and personal injury claims against sellers under $1,000 as a concession to customers. Claims under $1,000 account for more than 80% of cases in our store, and Amazon will bear these costs and not seek reimbursement from sellers who abide by our policies and hold valid insurance. These concessions will not affect your order defect rate, and you will be kept informed at every step so you can continue to ensure your products are safe”.

What are Amazon’s insurance requirements? 

You can also read these requirements in Seller Central under “Business Insurance”. Your commercial liability insurance policy must meet all of the following criteria:

1. The policy limit must be at least US$1 million per occurrence and in aggregate and cover liabilities caused by or occurring in conjunction with your business operations, including products, products/completed operations, and bodily injury; 
2. The insurance policy type can be either commercial general, umbrella, or excess liability and be occurrence based; 
3. Your insurance provider must have global claim handling capability and a financial rating of S&P A- and/or AM Best A- or better (if S&P or AM best is not valid or used in the country where you are required to obtain insurance, a local equivalent is allowed); 
4. Your insurance provider must give Amazon at least 30 days’ notice of cancellation, modification or non-renewal; 
5. The policy must name “Amazon.com Services LLC and its affiliates and assignees” as additional insureds; 
6. The deductible for any policy(ies) must not be greater than US$10,000 and any deductible amount must be listed on the certificate(s) of insurance; 
7. The policy must cover all sales from products you have listed on the Amazon website; 
8. Your insured name must match the “legal entity” name you provided to Amazon;
9. The policy must be completed in its entirety and signed; and 
10. The policy must be valid for at least 60 days from the date of submission.

How can Azure Risk help me?

For sellers registered in Hong Kong, Singapore and Thailand, selling on any Amazon marketplace, our brokers and partners can advise you on Amazon seller and reseller insurance. It’s critical for protecting your business and your assets. It prevents you from paying out of pocket for legal fees if your business is involved in a property damage or personal injury claim from a customer relating to an item you’ve sold.

CONTACT US TO GET STARTED ON YOUR AMAZON SELLER INSURANCE TODAY

Please get in touch with us for detailed information about our Commercial General Liability Insurance and customizing coverage applicable to your domicile and the products you’re selling on Amazon.com.

The information contained in this article is not intended to amount to legal or technical advice to any person in general or about a specific case. Every effort is made to ensure our comments are accurate and up to date. However, no responsibility is assumed for their accuracy nor for the views or opinions expressed, nor for any consequence of or reliance on them. You are advised to seek specific legal or technical advice from your usual advisers about any specific matter.