Do I Need Insurance for My Amazon Store?

Whether it’s equipping every home with voice-controlled personal assistants named ‘Alexa’ or delivering everything under the sun in like a day, Amazon is a hit these days. And its selling power is undeniable. It’s not only the largest online retailer in the world, but it's growing tremendously every year. 

And now, a lot of average Joes and Janes are getting in on the action themselves. Small businesses are using the power of Amazon’s open marketplace to find new customers. There’s even an extremely lucrative market for folks who source used books and sell them through Amazon—whodathunkit.

By October 2018, Amazon had already received 1,029,528 new sellers in that year alone. And business is booming. But if you’re thinking about joining the revolution, it’s a good idea to understand the whole picture and know what it’s going to take to be successful, and protected. That’s why we spoke with Amazon sellers and insurance professionals, and dug through Amazon’s seller policy, to provide you with all the information you need to know to get your business cookin’ right.

Does Amazon Require Business Insurance?

Yes, Amazon does require sellers to have business insurance, but only if they're making a certain amount of money.

According to Amazon, if your gross proceeds exceed the “insurance threshold” each month for three consecutive months, then they require that you get general, umbrella or excess liability insurance. In other words, if you’re making good money, you’ll need insurance.

Note: Despite Amazon’s minimum requirements for insurance, you should still always have insurance if you’re looking to dive into this as a career. All it takes is for one person to get a little reaction from the all-natural soap you sold them to bring your business dreams crashing down. It could even seep over into your personal life and finances, too. The best thing to do is talk with an insurance agent about your options.

What Type of Insurance Do I Need for Amazon?

Once you’ve talked to your insurance agent, you’ll have a better idea of the kind of insurance that fits your game best. But we do recommend you suit up with at least some form of general liability insurance to begin with. And once you’re making more than $10,000 a month, at the very minimum, Amazon requires that you get one of the following coverages:

• General liability insurance: If you get sued, this insurance provides general protection for you and your products.
• Umbrella liability insurance: Extra liability insurance that protects you from major lawsuits and protects your assets and future.
• Excess liability insurance: An excess policy provides limits in excess of an underlying liability policy, such as an umbrella policy.

For many businesses, a general liability policy will be sufficient. But your independent insurance agent can help determine if you need additional umbrella and/or excess liability coverage as well. Just tell them what you do and where you want to go with it, and they’ll take it from there.

What Additional Business Insurance Should I Look into for Amazon?

While general liability insurance may be a minimum requirement, successful business owners and insurance professionals have a few other options that are definitely worth considering, like:

• Cyber liability insurance: This protects you if your customer information is compromised. This includes credit card info, social security numbers, and other personal information. Plus, if there’s a cyber breach, you may be subject to fines and penalties from the federal government.
• Business income insurance: General liability can include this coverage, which can provide cash flow to keep your operations going if you’re unable to operate your online business.
• Product liability insurance: This protects you if your products somehow cause harm to a customer.

How Much Does Business Insurance Cost for Amazon?

The good news is that business insurance isn't going to break the bank. On average, a small business can expect to pay around $500-$1,000 a year for business insurance. However, if your products are food-related or could cause serious injury, you’ll want more coverage, and that will cost more.

Of course you’ll want to submit your yearly earnings so your insurance policy can be evaluated to ensure that you’re receiving the proper coverage.

Why Should I Get Business Insurance? 

Like we said, even if your sales are below Amazon’s “insurance threshold,” it’s still a great idea to have protection in place. And before you make your final decision, John Espenschield, an insurance agent with more than 18 years of experience, recommends you think before you pass on protection. 

“The pros to having insurance are keeping you from potentially paying tens of thousands out of pocket for lawsuits and cyber liability claims. The cons are wishing you had a commercial insurance policy after the fact. The low entry point of $500 to $1,000/year to provide you and your business with the coverage to avoid going out of business is worth the investment.”

Being Successful on Amazon

Being protected is an important part of being successful on Amazon. But being successful takes more than just the perfect insurance coverage. With so many sellers and products, you’ll need to stand out from the rest, so here are a few extra tips to help you shine.

• Utilize Amazon’s Fulfillment option: Fulfillment by Amazon, or FBA, stores your inventory for you and packs and ships your inventory directly to customers using Amazon Prime. And the Amazon Prime customer service center assists your customers and processes returns for you. This totally takes a lot of the work off your plate.
• Create your brand: Create a consistent message and theme for your company so that you can start building a reputation for yourself.
• Market your page: Leverage social media, content marketing and online advertising to drive traffic to your Amazon sellers page.
• Ask for reviews: Amazon reviews are a big driver of how your product appears in Amazon search. Encourage your clients to review you on Amazon.

Time to Open Up Shop

Well, there you have it. We hope we helped answer your Amazon business questions, especially on the insurance side. Now, the Amazon platform is open to all sorts of different shops, so make sure you’re doing the kind of research that applies to stores like yours. And when you talk to your insurance agent about your shop, tell them everything. That way they can help put together the right set of insurance for you. Happy selling, and see you on Amazon soon.