Most Amazon sellers never consider the liability they incur by selling a customer a widget. They think “I don’t sell anything dangerous like vitamins or groceries, I just sell shoes”. But what happens when a new pair of shoes have a defect causing the customer to trip while out jogging and they (literally) break a leg? You might think that means the manufacturer would get sued, but not you as just a middle-person, but you would be wrong. Often when a lawyer is dealing with a defective product lawsuit they sue EVERYONE in the chain of distribution just to see what sticks. This is why you need liability insurance for Amazon sellers.
Not only should you have liability insurance anytime selling in America, but Amazon requires Pro Merchants (who meet criteria outlined below) to carry liability insurance. This is all laid out in the Amazon Terms of Service which you read when you signed up. You did read the TOS when you signed up to become a millionaire seller on their platform… Right? In all seriousness, if you haven’t read the Amazon seller TOS click the link above and do so. It’s important.
In case you think Amazon is just doing this to help protect sellers, your insurance policy also must cover them in case of liability for the products you sell.
Liability Insurance for Amazon Sellers requirements
On the Program Policies page in Seller Central (must be logged in) you can find numerous policies you are required to abide by as a seller and details of each including the liability insurance for Amazon sellers policy.
Pro Merchants who sell on Amazon must provide proof of Commercial General Liability insurance. This insurance, obtained at the merchant's expense, shall cover up to $1,000,000 per occurrence and in the aggregate and must include product liability, bodily injury, or personal injury, property damage, and other requirements as stated in the Amazon Services Business Solutions Agreement. The insurance must indicate that "Amazon.com, Inc., and its affiliates and assignees" are added as additional insureds.
If you read the Amazon Services Business Solutions Agreement (aka the TOS) like I recommended above then you already know if you sell above the "Insurance Threshold" in your country for 3 consecutive months ($10,000 USD US Sellers) you are required to get an insurance policy. Even if you do not meet those thresholds currently, I recommend you obtain liability insurance to protect you in court.
How much insurance do I need?
You can read the fully details here but in order to be in compliance and protected you need to have Commercial General Liability coverage of at least $1 million per occurrence, $1 million in aggregate for products and completed operations and $1 million in general aggregate. You must make sure the "Additional insured" in the policy includes the following:
"Amazon.com, Inc., its affiliates and assignees are additional insureds, as their interests may appear"
Where do I get insurance & How much will it cost?
Shopping for Commercial General Liability insurance is relatively straightforward. Almost all major insurance providers will be able to walk you through the process to get quotes.
Product liability insurance costs are generally based on what categories you sell in and your overall volume in those categories. Selling $500k a year in clothing is going to be cheaper to insure than $500k a year in vitamins. For non specialized goods, most sub million dollar a year sellers pay $500-$1,000 per year for liability insurance.
I recommend using Insureon to get quotes from multiple carriers and find the best plan for the money. Simply go to their website, put in all your information and you will get quotes from half a dozen carriers for liability insurance within a few days.
Don't forget to also check with your personal insurance agent as they might offer insurance at a discount depending on how your business is structured and your insurance companies rules.