Business Insurance for Amazon Sellers

The most common and comprehensive type of Amazon seller insurance is general liability insurance. In fact, once your Amazon seller reaches a certain level of sales, Amazon may require that you have a general liability insurance policy. 

We recommend general liability insurance as your first line of defense against a variety of the most general and commonly occurring claims.

Some of the risks general liability insurance covers are:

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

While an Amazon seller may not be legally required to carry general liability insurance, operating without it is extremely risky. If your Amazon seller is sued, you could face fees totaling tens to hundreds of thousands of dollars (or more).

The cost of your Amazon seller’s general liability insurance will highly depend on the size of the business. Amazon sellers in America spend an average of $500 per year for general liability insurance coverage.

Compare the average cost of general liability insurance for Amazon sellers to other professional industries using the graph below:

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

• Location
• Deductible
• Number of employees
• Volume of business
• 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.

Example 1: A customer claims that a product that you sold was faulty and caused a fire. The customer sues your business for significant damages, including damages to their home, temporary housing expenses, and their own psychological shock. If found liable, general liability insurance may be able to help cover your legal expenses as well as some of the losses as ordered by a court or settled privately.

Example 2: One of your Amazon customers has an allergic reaction to one of the beauty products that you resell on Amazon. The customer sues both you and the product manufacturer, claiming that the product you sold them put them in the hospital with a severe allergic reaction. Your general liability insurance will help you cover some of the costs of your legal defense and may pay part of any settlements or judgments found against you.

Example 3: You experience a data breach and private customer information and emails are published online. Your customers are upset, and several that are the subject of sensitive emails or information threaten to sue. Your general liability insurance may help you cover some of the cost of your legal bills and part of any settlement if you are found liable.

Check out our review of the Best Small Business Insurance Companies.

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

Commercial Property Insurance

If your Amazon seller owns any type of property worth $10,000 or more, you will need to invest in a commercial property insurance policy to insure your business’s assets. Many Amazon sellers quickly rack up this amount in inventory and equipment.

Commercial property insurance helps cover the costs of replacing/repairing inventory, equipment, real estate, and more in the event of unexpected damage.

Commercial Umbrella Insurance

For many Amazon sellers, commercial umbrella insurance is an important policy to take out. Commercial umbrella insurance exists to cover those gaps beyond existing policies, ensuring that your Amazon seller doesn’t find itself crippled by an extreme and unpredictable loss.

Commercial Auto Insurance

If your Amazon seller owns a vehicle to pick up or drop off supplies or merchandise, or for any other business-related reason, you will also need a commercial auto insurance policy. This insurance policy will cover automotive damages incurred if your automobile or delivery vehicle is damaged on the road.

Cyber Liability Insurance

Another type of insurance that Amazon sellers may want to consider is cyber liability insurance. In the event of a data breach or other cyber security incident, a business should have cyber liability insurance in place to cover the costs associated with the breach as well as any additional losses the firm may incur.

Home-Based Business Insurance

If your Amazon seller is run from home, your normal home insurance policies may not cover accident damages related to your business.

Home-based business insurance is designed with this in mind, and it is often available through a business owner’s policy or as a rider extension for existing homeowner insurance.

Worker’s Compensation Insurance

In most states, if you have any employees other than yourself (and sometimes family members), you will need to purchase worker’s compensation insurance. Workers' compensation insurance, or "worker’s comp” for short, is a type of insurance that covers accidents, injuries, and illnesses that employees may suffer on the job. Worker’s compensation coverage aids with the payment of medical expenses, missed wages, and other costs associated with illness or injury, no matter who was at fault.

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 seller:

• 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.