Last Updated: May 23, 2024, 8:16 am by TRUiC Team

Amazon Dropshipping Business Insurance

Getting insurance for your Amazon dropshipping business is essential.

Amazon dropshippers need to be protected against claims involving things that could feasibly cause them financial harm and are likely to happen.

For example, an employee unintentionally shipping a broken product to a customer, your dropshipping business will need insurance in order to protect itself from the breach of contract lawsuit the customer may file against it. 

We’ll help you find the most personalized and affordable coverage for your unique business.

Compass needle pointing towards blue insurance logo
How to Start an LLC Tip Icon

Recommended: Next Insurance is dedicated to matching small businesses with the right policy at the best price.

Best Insurance for an Amazon Dropshipping Business

General liability insurance is — generally speaking — one of the most important insurance policies for Amazon dropshippers. 

Some of the risks general liability insurance covers are:

  • Bodily injury
  • Property damage
  • Medical payments
  • Legal defense and judgment
  • Personal and advertising injury

While general liability is a great base policy for all businesses, to ensure your Amazon dropshipping business is fully protected it will need several supplementary policies, such as:

  • Commercial auto insurance: Provides protection to your business if one of its vehicles is involved in an accident on a public road.
  • Professional liability insurance: Provides financial assistance to your business if it is sued for a mistake it made in the performance of its duties.
  • Commercial property insurance: Covers the costs of replacing any business property that has been destroyed by a covered event (e.g., a fire or natural hazard).

When businesses are searching for insurance coverage, they are generally faced with the choice between two different types of providers. These options are:

  • Traditional brick-and-mortar providers: Providers such as The Hartford and Hiscox fall into this category. While they are typically more costly than their online counterparts, they are more well-established. 
  • More modern online-based providers: Fully online providers like Next Insurance and Tivly are a popular option for small businesses due to their speed, accuracy, and affordability.

Let's Find the Coverage You Need

The best insurers design exactly the coverage you need at the most affordable price.

Cost of General Liability Insurance

On average, Amazon dropshipping businesses in America spend between $350 - $900 per year for $1 million in general liability coverage.

Compare the average cost of general liability insurance for an Amazon dropshipping business to other professional industries using the graph below.

Several factors will determine the price of your policy. These include your:

  • Location
  • Deductible
  • Number of employees
  • Per-occurrence limit
  • General aggregate limit

You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy.

A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.

Graph showing average price of general liability insurance prices per industry

How to Start an LLC Tip Icon

Find the Best Rate

Discover the best coverage at the lowest rate in our cheapest business insurance review.

Common Situations That General Liability Insurance May Cover for an Amazon Dropshipping Business

How to Start an LLC Tip Icon

Example 1: After visiting your place of business, a customer leaves through your front door, trips on a broken piece of sidewalk, and demands you pay for her medical treatment. General liability insurance would cover her medical bills.

How to Start an LLC Tip Icon

Example 2: Claiming your last marketing campaign libeled its business, a competitor sues your company. General liability insurance would cover your legal defense fees.

How to Start an LLC Tip Icon

Example 3: While pushing a dolly, you slip on some gravel and accidentally drive the dolly into the side of a luxury sedan. Your general liability policy would cover the customer’s vehicle repair costs.

Other Types of Coverage Amazon Dropshipping Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some of the most common types of coverage:

Commercial Property Insurance

You made a major investment in your business equipment and supplies. If you own the building in which you operate, commercial property insurance would cover the cost of repairing or replacing your business-related property in the event of a fire, burglary, or natural disaster. This includes structural damage to your building or grounds as well as any equipment or supplies you store there.

Professional Liability Insurance

While you strive to help customers ensure the safe, timely shipment of their packages, there’s always a chance someone might decide your services caused them or their business harm. If a customer sues you based on your services or advice, professional liability insurance would cover your legal costs.

Commercial Auto Insurance

Any vehicle you use primarily for business requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. Be sure to select a policy that covers not only accident-related vehicle repair costs and medical treatment for anyone injured, but also sufficient protection for any business materials you carry in your vehicle.

Workers’ Compensation Insurance

If you hire any employees for your Amazon dropshipping business, most states will require you to carry workers’ compensation insurance for both part-time and full-time workers. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover, but also any disability or death benefits stemming from a work-related accident.

Additional Steps To Protect Your Business

Although it’s easy (and essential) to invest in business insurance, it shouldn’t be your only defense.

Here are several things you can do to better protect your Amazon dropshipping business:

  • Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
  • Set up an LLC or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
  • Stay up to date with business licensing.
  • Maintain your corporate veil.

Amazon Dropshipping Business Insurance FAQ

Yes, absolutely. You will need to first get a quote from an online business insurance provider like Next Insurance. Next allows you to then purchase a policy immediately and your coverage will be active within 48 hours.

A typical business owner’s policy includes general liability, business interruption, and commercial property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.

"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.

We would recommend obtaining appropriate insurance for your Amazon dropshipping business prior to the commencement of its operations in order to protect yourself from potential claims.

Additionally, it’s worth noting that certain insurance policies (e.g., workers’ compensation, commercial auto) may be required by law for legitimate operation.

Not necessarily. Certain exceptions may be written directly into your Amazon dropshipping business insurance policy, and some perils may be entirely uninsurable.

Yes, an LLC is meant to create a legal barrier between your business and your personal assets and credit. If you haven’t formed an LLC yet, use our Form an LLC guide to get started.

An LLC doesn’t protect your business assets from lawsuits and liability– that’s where business insurance comes in. Business insurance helps protect your business from liability and risk.