Insurance for Amazon Sellers: Everything You Need to Know
All sellers on Amazon.com with sales of US$10,000 or more in one month are now required to get liability insurance and upload the certificate to Seller Central. Failure to do so may result in withheld payments or account suspension.
We spoke to Ashlin Hadden from Ashlin Hadden Insurance about the new requirements, and the process for getting insured especially for sellers based outside of the US.
This article lists frequently asked questions about insurance for Amazon sellers, and is based on the interview with Ashlin.
You can watch the full interview on YouTube here
What are the new insurance requirements by Amazon?
If you are selling more than US$10,000 in a month after September 1, 2021, you need liability insurance. The certificate must be uploaded to your Seller Central.
This requirement is for all sellers – whether you’re doing private label, retail arbitrage or distribution.
This is an existing requirement on Amazon, but they have not been strictly implementing it until now.
Here is what Amazon says about insurance requirements in Seller Central:
“Commercial liability insurance will protect you from incidents resulting from the products you sell, and give you peace of mind while you focus on growing your business. Under section 9 of the Amazon Services Business Solutions Agreement, you are required to obtain and maintain commercial liability insurance within 30 days after exceeding $10,000 in gross proceeds in one month on Amazon.com, or if otherwise requested by us.
Insurance policy criteria
Your commercial liability insurance policy must meet all of the following criteria:
- Policy limits must be at least $1 million per occurrence and in aggregate, covering all liabilities caused by or occurring in conjunction with the operation of your business, including products, products/completed operations and bodily injury;
- Policy type can be either commercial general, umbrella, or excess liability insurance and must be written on an occurrence basis;
- 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);
- Your insurance provider must give Amazon at least 30 days’ notice of cancellation, modification or nonrenewal;
- The policy must name ” Amazon.com Services LLC., and its affiliates and assignees” as additional insureds;
- The deductible for any policy(ies) must not be greater than $10,000 and any deductible amount must be listed on the certificate(s) of insurance;
- The policy must cover all sales from products you have listed on the Amazon website;
- Your insured name must match the “legal entity” name you provided to Amazon (To view your legal entity name, see your Account Info page);
- The policy must be completed in its entirety and signed; and
- The policy must be valid for at least 60 days from the date of submission”
Even if you’ve previously sent an insurance policy by mail, it now has to be uploaded in Seller Central.
Is the US$10,000 sales guideline applicable only after September 1, 2021 or is it retroactive?
I’ve had US$10,000 sales in only one month in the past, do I still need to get liability insurance?
If you are currently actively selling on Amazon, you should get insurance even if your sales are below US$10,000. In case your sales reach US$10,000 at any point in the future, your account could be flagged, so why take the risk.
What kind of insurance do I need for Amazon?
You need liability insurance on Amazon.
According to Amazon’s guidelines:
“You may purchase either commercial general, excess, or umbrella liability insurance. When you decide on an insurance, your policy should cover all products you list for sale on Amazon.”
What happens if I hit the US$10,000 mark and I don’t have insurance?
Amazon might suspend future payments, and give you 30 days to comply by uploading your insurance certificate. If you still do not comply, your account could be suspended.
What is the process of applying for insurance via a US insurance provider?
Regardless of whether your company is based in the US or overseas, you need the following to apply for insurance:
- EIN number – Overseas companies can apply for a US EIN (process explained later in the article)
- US mailing address – This is not just any address, but it has to be an address where your company is registered. You cannot use your 3PL or your friends and family living in the US. This has to be an address associated with your company.
- Product description – You need to list all products you’re selling on Amazon
- Expected sales volume of each product
- The company name on your insurance certificate needs to match exactly to the company name on your Amazon account – right up to the comma and the period.
If you’re an overseas seller, don’t mention your foreign address.
An EIN and a US mailing address give you your US presence in order to apply for a US insurance policy. Without these two, you will not be able to have US insurance.
To apply via Ashlin Hadden Insurance, go to www.ecom.insure, and click on “Get a Quote”.
Next fill in the following information:
- Contact information
- Select “Private Label” if you’re a private label seller
- Legal entity name (must match exactly the entity name registered with Amazon)
- Physical address – this should be the US address
- Mailing address – this can be your overseas address
- Link to your storefront
- Sales – estimated sales are fine
- Deductibles (known as Excess in Australia) – Put zero in this field
Once the form is submitted, Ashlin’s team will find the best carrier for you from among 40 different companies, and you will hear directly from the carriers.
After your insurance policy has been confirmed, make the payment and Ashlin’s team will send you the documents including your Certificate of Insurance. They will even give you step-by-step instructions on where to upload the policy on Amazon, and what to put in each box.
Don’t upload your entire insurance policy as Amazon only needs the certificate of insurance.
In addition, Amazon has specific requirements about what they need on the certificate of insurance, and if your certificate does not meet their guidelines, it could get rejected. It’s best to have a company such as Ashlin Hadden Insurance manage this, as they understand Amazon’s requirements.
How long does it take to get the insurance certificate?
It’s usually a quick process and takes a few days or a week if all the information is complete.
Can I get insurance even if I don’t have any products on Amazon?
Yes, you can. However, the insurance company needs to know what kinds of products you’re planning to sell and what your expected sales value is. This allows them to give you an accurate quote for your insurance premium.
How do I apply for an EIN if I’m not based in the US or don’t have a US company?
You need to get an EIN number (Employer Identification Number) from the IRS, and it is free to apply for.
Apart from needing it for insurance cover, you will also require this number for your shipper/broker when clearing customs with incoming goods or dealing with a customs bond.
In the United States, every business is required to have an EIN. This unique number, which is issued by the federal government, is used by the IRS in order to quickly and easily identify each business for tax purposes.
To obtain an EIN as an international applicant, you must call the IRS at this number: +1-267-941-1099.
This is not a toll-free number, and the hours of operation are from 6:00 a.m. to 11:00 p.m. Eastern Time
Before making the call, download Form SS-4 fill it up and print it out so you have the answers ready when asked during the call.
The person making the call must be authorized to receive the EIN and answer questions concerning Form SS-4
If you’re in Australia or from Asia and work weekdays, you can call Saturday morning as it is still Friday in the US.
The whole process should only take you about 15 minutes then they will give you your number and send by mail the actual certificate, which can be faxed to you if you need it urgently for your freight forwarder.
US citizens or US-based businesses must apply online.
Are there any tax ramifications in the US if I use an EIN as an overseas company?
No, as an overseas registered entity, you don’t have any tax obligations in the US.
Can I get insurance if I am a sole proprietor or does it have to be a private limited company?
Yes, you can get insurance even if you are a sole proprietor, but if you’re outside of the US, you still need an EIN and US address.
Will the insurance still be valid in the event of a claim even if the address is a virtual office?
Yes, the insurance will be valid in the event of a claim even if the US address is a virtual office.
Is it ok for insurance purposes to have an Australian company with a registered address in Australia and a virtual address in the US?
Yes, it is ok as long as you have an EIN and a US address. Don’t put your Australian address on the insurance form.
Your address on Amazon can be the address of where your company is based, but the address on the insurance policy has to be a US address.
I’m based outside of the US, can I use an insurance provider in my country?
Yes, you can get insurance via a broker in you country as long as they offer global coverage. However, make sure the premiums are not too high. Some insurance brokers are known to charge extremely high premiums as compared to what sellers have been paying when they get insurance from Ashlin Hadden Insurance.
Another consideration is that in the event of a claim, how well will the overseas insurance company be able to support you. A US-based insurance broker and carrier understands US litigation and laws, and will be able to provide better legal support in case there is a claim.
If I already have an existing policy, should I try to upload it on Amazon?
Yes, you can upload it to Seller Central, but the company name on your policy should match exactly the company name on your Amazon account.
Does the insurance policy cover legal fees in case there is a lawsuit?
Insurance policies from Ashlin Hadden Insurance will cover legal fees, but be aware that some carriers will not cover legal fees.
Approximately how much are insurance premiums?
If you’re not doing private label, and depending on your sales, it could cost between US$500 and US$800 for the entire year.
Premiums are higher for private label sellers and depend on the product you’re selling.
The following are 5 risky categories that have higher premiums of about US$3,500 and above per year for a policy. The actual amount depends on the product you’re selling and sales volumes.
- Anything that goes on the body – lotions, cosmetics, skincare
- Any product that goes in the body – food, supplements
- Products for children – toys, clothes, accessories, food
- Products for pets – leashes, food, supplements
- Exercise & fitness equipment
Do I need to update the insurance policy when I add new products to my portfolio?
If you’re doing Retail Arbitrage, Online Arbitrage or wholesale, you don’t need to update the insurance policy when you add a new product or category.
If you’re a private label brand, you need to inform your insurance company when you add a new product to your lineup that’s quite different from what’s already on your insurance policy.
For example, if you’re selling burp rags and add a variation of an existing product, you don’t need to update the policy. But if you add baby food to your lineup, you should inform your insurance broker.
Ashlin explains that these are named insurance policies that mention the name of the product you’re being insured for. If the product is not listed on your policy, it will not be covered in the case of a claim.
If I discontinue a product, will there be a reduction in premium?
If after removing a product, there is an overall reduction in sales, there might be a reduction in premiums. But if the product is not selling much and doesn’t affect overall sales, there may not be a reduction in premium.
Do I need to update the policy if my sales have increased significantly than what is indicated on the insurance policy?
Yes, the insurance company does need to know your actual sales figures, and they can be informed mid-term or at the end of the term.
If you’re paying monthly instalments, the amount can be adjusted mid-term. But at the end of the year, the insurance firm will do an audit, and they will ask you to show your actual sales figures. If your sales figures are significantly higher than what is on the policy, they will charge you for that.
How long is a typical claim period for getting reimbursement provided there are no issues with Amazon and the insurance company?
It depends on what the claim is. Ashlin has finalised claims within 30 days, and there are others that have taken 2 years.
Do you have an example of a recent case where an Amazon seller got sued by a consumer and how did having insurance help?
Ashlin had a customer who was selling resistance bands under her own private label brand and got a claim when the product snapped back and hit a user in his face.
The brand had written instructions and a YouTube video on the correct and incorrect ways of installing and using the product. Despite this, they could not prove in court that the customer had installed it incorrectly and ended up settling for US$650,000. Plus, she had to pay legal fees and overall this claim cost her over US$1 million!
Her policy was for US$2,500 a year with over a US$1 million dollars in coverage.
If the brand didn’t have a policy, they would have had to pay all of this from their pocket. The legal fees in the US are very high with attorneys charging over US$500 per hour, and such cases usually require at least 40 to 50 hours.
Why do you recommend Ashlin Hadden Insurance?
We recommend Ashlin Hadden Insurance because they understand Amazon’s requirements well, and have been working closely with Amazon sellers for many years. They are very responsive, helpful, and understand the needs of Amazon sellers.