Amazon Insurance for Pro Merchants and FBA?

Amazon Insurance for Pro Merchants and FBA

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Amazon.com makes it easy for individuals and businesses to increase sales and reach new customers that they might not otherwise be able to reach.

This is because Amazon is so freaking huge.

It’s hard to fathom, but Amazon processed about 44% of all e-commerce sales on the web in 2017.

This equated to around 4% of all U.S. retail sales!

Amazon Insurance Requirements

You can sell on Amazon as a business or an individual. A business account is called “Professional” or “Pro Merchant” account. Individual is just called “Individual”.

Hiscox.com
Pro Merchants pay $39.99 per month in fees. Individuals pay $0.99 cents per sale.1 You can learn more about the options and sign up here.

Being a “Pro Merchant” or using Fulfillment by Amazon (aka “FBA”) has Amazon insurance considerations.

Pro merchants are required to hold basic business insurance (you can get a quote online through Hiscox).

For instance, Pro Merchants insurance requires providing proof of $1,000,000 of commercial general liability insurance once you pass a certain threshold.

In Item 9 “Insurance” of the Amazon Services Business Solutions Agreement it reads:

If the gross proceeds from Your Transactions exceed the applicable Insurance 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 throughout 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.

However, Amazon FBA mentions including some coverage for damaged inventory that is held at Amazon’s warehouses. However the Amazon insurance language regarding reimbursement states:

The reimbursement amount for any single item will not exceed $5,000. For items valued at more than $5,000, we recommend that you consider purchasing third-party insurance.

The insurance requirements that Amazon is recommending include coverage for inventory held at third party locations.

Such insurance can be added as an endorsement on a commercial general liability policy.

Easiest Way to Comply with Amazon Insurance Requirements?

To comply with Amazon insurance requirements for Pro Merchants, a small business insurance policy can be found online or by speaking with an agent.

Hiscox offers small business insurance policies directly online.

For more hand holding, though, it’s often best to talk with an insurance agent about your particular business situation.

For instance, maybe Amazon Pro Seller or FBA is only one part of an e-commerce business. Or perhaps you operate a warehouse of your own, or run a separate online business with property.

For instance, drop shipper insurance requirements might be slightly different than the Amazon insurance requirements for a Pro Merchant or FBA seller.

As such, when researching Amazon insurance options, it can be worthwhile to speak to an agent.

Captive Insurance Agents

A captive agent is an agent who works with only one insurance carrier. Think State Farm, or Farmers or AllState.

These carriers typically offer a broad range of insurance. However, a captive agent is limited to talking to Farmers OR Allstate OR State Farm.

In order to shop Farmers AND Allstate AND State Farm, you would have to talk to three different insurance agents.

Independent Insurance Agents

With an independent insurance agent you have a single point of contact.

An independent insurance agent can connect you with many different insurance carriers (i.e. The Hartford, Travelers, CNA, AIG, Hamilton, Hiscox, etc.)

This is good because every insurance carrier offers something different.

Some carriers specialize in warehouses, or transportation, or imported products, or studios or architects and engineers, etc.

Each of these insurance underwriting specialties is called an “appetite“.

Carriers also offer a unique insurance forms (called “endorsements”). Special endorsements can include broader coverages, or higher limits, for your type of business that other carriers may not offer.

Amazon Insurance Requirements for Professional Selling Plans

One of the benefits of working with an independent agent is that, like a consultant, they can cater to your specific needs.

For instance, according to the Amazon Pro Seller Services agreement, the Amazon insurance requirements for Pro Sellers are as follows:

Sellers with professional selling plans on Amazon.com must provide proof of Commercial General Liability insurance. This insurance, obtained at the seller’s expense, shall cover up to $1,000,000 per occurrence and in the aggregate and must include products liability, bodily injury, or personal injury, property damage, and other requirements as stated in the Business Solutions Agreement. The insurance must indicate that “Amazon.com, Inc., and its affiliates and assignees” are added as additional insureds.

Summary of Requirements for professional selling plan insurance
The Certificate of Insurance must:

  • Be an original document.
  • Contain an Additional Insured Endorsement.
  • List all seller subsidiaries or DBAs covered by the certificate provided.
  • Provide at least 30 days’ notice of cancellation, modification, or non-renewal.
  • Show complete insurance carrier names as listed in the A.M. Best Property & Casualty Guide.
  • Be completed in its entirety and signed. Note: Binders are not acceptable.
  • 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.

The required Additional Insured wording must be as follows:

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

This last requirement is called an “Additional Insured” feature or endorsement.

The good thing about an independent agent is that he or she represents you, not the insurance carrier…

So, you could literally give these requirements to an independent insurance agent and ask that they find you the best policy at the best price.

Independent agents do this work as a courtesy, and they, in turn, are paid by the insurance carrier when they write the policy.

What About My Homeowner’s Insurance?

Homeowner’s insurance typically excludes business related claims.

A business insurance policy that addresses your Amazon insurance requirements will likely be broader and cover claims related to your home based business operation.

E-commerce companies should have either a business general liability insurance policy, or a combined business general liability insurance and property insurance policy, called a BOP.

BOP is short for “Business Owner’s Policy”.

BOPs are usually quite affordable, and include several coverage types.

While many online business owners operate as sole proprietors, you may want to research incorporating.

Certain carriers will not insure individuals.

Also, if you are incorporated, such as an LLC or S-corp, you may have an easier time getting the insurance requirements, including higher limits, that you need.

Good luck!

Footnotes

  1. Basically if you regularly sell more than 40 items per month, you should probably sign up for the “Professional” account so you will save a little money.