If you’re just starting out selling on Amazon, you may have heard that you now need Amazon Seller Insurance. In fact, under the guidelines introduced by Amazon last year, sellers are only required to have product & general liability insurance if they sell more than $10,000 worth of stock in any one month. But if you’re not at that threshold yet, it doesn’t mean you should forget about insurance entirely.
There are many types of insurance available to eCommerce sellers, all indemnifying against different things that can (and sometimes do!) go wrong when selling online, no matter what your revenue levels are. Let’s jump in and look at the main types.
General Liability Insurance
General liability insurance covers your business in the event a customer is injured or their property is damaged because of your business or the products you sell. For example, if you knock over a wall while making a delivery the cost of repair would be covered by general liability insurance, as would accidental copyright infringement, or someone slipping in your warehouse and being injured.
Whatever stage of growth your company is at, general liability insurance is essential. It only takes one accident for you to be on the hook for tens, or potentially hundreds of thousands of dollars.
Take Jake’s story (not his real name). Jake and his co-founders have been selling on Amazon for about ten years, selling a range of household goods. A few years ago, they were notified that a claim had been made against their business after someone fell from a ladder while installing one of their products, and cut their hand on the hardware needed to install it.
Although the hardware was not significantly different from any other brand, the customer claimed it was “too sharp”. In addition to $30,000 in hospital fees, the customer wanted compensation, asking for somewhere around $120,000. Fighting the case out in court will cost another $30,000 to $60,000 in legal fees — and if the case is lost, their business will have to cover the full amount
Had Jake and his colleagues been insured, the insurance company would simply have settled the claim on their behalf.
Product liability insurance
Product liability insurance is sometimes confused with general liability because they sound similar, but in fact, they guard against different things. While general liability insurance can cover any and all accidents occurring in relation to your business, product liability insurance covers against defects in your product that cause harm.
Although you may believe your products are perfectly safe, defects can easily creep in during the manufacturing process, rendering a seemingly harmless item dangerous. This can happen in a number of ways; for example:
- Poor testing or a manufacturing error resulting in a defective product
- Accidental contamination, such as a loose screw falling into a stuffed toy
- Malicious tampering by employees or third parties
- Mislabelling, such as an allergen being left out of a list of ingredients
- Misleading marketing.
If a product has to be recalled, product liability insurance will cover the cost.
Professional Liability Insurance
If you are a seller who sells a service or digital product rather than a physical product, don’t assume that you are shielded from liability claims! Professional liability insurance, as its name suggests, is most commonly taken out by professionals such as doctors, lawyers or accountants to protect against claims of malpractice, but it can also apply to service providers such as marketers, if the materials you supply are deemed to damage your clients’ business.
Amazon Suspension Coverage
In the past, Amazon used to flag pages that were potentially in contravention of its strict rules, trusting sellers to make the necessary changes. Sadly that’s no longer the case. As it can take up to a month to have a page reinstated, the best protection against Amazon suspension is to proactively guard against it, but with so many regulations to adhere to, it’s all too easy to wake up and find a product page has been suspended.
While often this is merely an annoyance, if the suspension falls during a particularly busy period or affects a seasonal item, it can cause significant loss of revenue. In that scenario, Amazon suspension insurance will step in to make sure your business costs are covered.
Shipping Insurance
The nature of eCommerce means that most Amazon seller businesses are international to at least some extent. Even if you manufacture your product at home and sell only to a domestic market, chances are that at least some of your raw materials come from abroad. And, of course, even items shipped domestically have to be physically moved around within the supply chain.
The Covid pandemic had a deep impact on global supply chains. That turmoil doesn’t seem to be going away anytime soon, as Covid was swiftly replaced by the war in Ukraine. The consequence is an understaffed shipping industry struggling to keep up with rapidly increasing demand. In those circumstances, mistakes can easily be made leading to lost and damaged materials or products. And that’s on top of the standard shipping risks, such as transport containers being lost at sea in bad weather.
Cybersecurity Insurance
All eCommerce is, by its nature, located online. That leaves your business open to cybersecurity threats, from interruptions in internet service to hacking to Amazon hijacking.
One of the most common vulnerabilities for eCommerce sellers is the risk of customer data, such as credit card information, being hacked. If that happened, cybersecurity insurance would cover the costs of notifying customers and rectifying the situation, including risk assessments, and putting better safeguards in place for the future.
Cybersecurity insurance can also cover legal fees in the event that your store suffers a cybersecurity attack.
As an Amazon seller, it’s important to know what kind of insurance you need and what kind of insurance you should have in order to protect your business. If you want to get liability insurance at the best price and save time in the process, you can get started here.
