Amazon requires that many sellers obtain product liability insurance, in order to cover potential damage, injury, or financial loss caused by defective and unsafe products. In this guide, we explain what sellers must know about Amazon product liability insurance requirements in the following marketplaces:
- United States
- European Union
- United Kingdom
- Australia
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What is product liability insurance?
Product liability insurance is a type of commercial insurance for business operators, including importers, manufacturers, and e-commerce sellers, that helps to reduce the loss or damage when claims happen due to defective products.
A product liability insurance usually covers costs induced by design defects, manufacturing defects, compliance issues, or other types of problems that might lead to injuries or losses for consumers.
Product Liability Insurance Guides
You can read the following articles to learn more about what product liability insurance is and its coverage in different markets:
- List of Product Liability Insurance Companies in the United States
- List of Product Liability Insurance Companies in the European Union
- List of Product Liability Insurance Companies in the United Kingdom
- List of Product Liability Insurance Companies in Canada
- List of Product Liability Insurance Companies in Singapore
- List of Product Liability Insurance Companies in Hong Kong
- List of Product Liability Insurance Companies in Australia
What is Amazon product liability insurance?
In general, product liability insurance can cover legal fees and other costs arising as a result of claims from consumers. As such, product liability insurance can protect your business from unexpected and major expenses.
In this context, Amazon product liability insurance is not referring to insurance provided by Amazon itself, but insurance providers offering solutions for Amazon sellers.
Requirements
Keep in mind that product liability insurance does not give you a free pass to sell products that fail to meet applicable safety, certification, labeling, and testing requirements.
Product liability insurance providers often check test reports, certificates, and labels to assess if your products are compliant. Still, you can do everything by the book and still end up with defective and unsafe products – which is where product liability insurance for Amazon sellers comes in.
Is product liability insurance mandatory when selling on Amazon in the United States?
According to Amazon Seller Central, starting from September 2021, sellers with a gross sales revenue of USD 10,000 in any month are required to obtain commercial liability insurance with limits of at least USD 1 million. The liability insurance policy must also name Amazon as an additional insured party.
If a seller does not obtain commercial liability insurance, Amazon may seek reimbursement for the costs incurred in resolving claims. Amazon may also restrict sellers’ sales activity or even suspend their accounts until they obtain a commercial liability insurance policy. Sellers can choose among commercial general, umbrella, or excess liability insurance.
Is product liability insurance mandatory when selling on Amazon in the European Union?
FBA (Fulfilment by Amazon) sellers on Amazon EU sites need to obtain a public third party liability insurance, which should include products liability and bodily injury if their turnover is over a certain threshold for 3 consecutive months. Below are examples of turnover thresholds for different countries:
a. Amazon Germany: EUR 5,000
b. AmazonFrance: EUR 5,000
c. Amazon Italy: EUR 5,000
d. Amazon Spain: EUR 5,000
e. Amazon Netherlands: EUR 5,000
f. Amazon Sweden = SEK 50,000
g. Amazon Poland = PLN 22,500
Sellers should pay for the liability insurance in connection with each Amazon account where they operate. Such insurance should cover liabilities caused by or occur in conjunction with the operation of their business, including bodily injury. The insurance policy should name Amazon as an additional insured party.
Is product liability insurance mandatory when selling on Amazon in the UK?
FBA sellers selling on Amazon UK and the Channel Islands need to obtain a public third party liability insurance, which should include products liability and bodily injury if their turnover exceeds the threshold of GBP 4,000 for 3 consecutive months.
Sellers should pay for the liability insurance covering liabilities caused by the defective products and leading to bodily injury or other damages. Amazon should also be named as an additional insured party in the liability insurance policy.
Is product liability insurance mandatory when selling on Amazon in Australia?
FBA sellers selling on Amazon Australia should purchase product liability insurance if their turnover exceeds the threshold of AUD 10,000 for 3 consecutive months.
Sellers should pay for the liability insurance policy covering liabilities induced by the defective products and lead to bodily injury or financial loss. Also in this case, Amazon should also be named as the additional insured party in the liability insurance policy. As for the US, sellers can choose between commercial general, umbrella, or excess liability insurance.
Do Amazon sellers need a specific liability insurance policy?
Amazon specifies that sellers should get commercial general, umbrella, or excess liability insurance for US or Australia, and public third-party liability insurance for the EU or UK.
As far as we know, currently, Amazon does not have an appointed list of “approved” insurance companies for sellers. Note that, according to our research, not every insurance provides liability insurance policies that fit Amazon sellers.
For example, a seller from Europe shared the experience of being rejected by an insurance company because the insurer would not add Amazon as a named insured, as required by Amazon. Others shared their experience on the Amazon Seller Forum on the difficulty of finding insurance companies that provide liability insurance policies that are suitable for Amazon sellers.
Therefore, we suggest that sellers get in touch with the Amazon support team before purchasing any insurance policies, in order to confirm that the policy fits Amazon’s requirements. Here are some insurance companies that claim to provide liability insurance policies to Amazon sellers:
Can our seller account be suspended without insurance?
Amazon has stated that it is mandatory for sellers to obtain and keep on hand valid product liability insurance once they reach a specific threshold. Sellers who do not provide the required insurance might have to reimburse Amazon for any amount of money it incurs when it resolves claims.
Also, sellers could possibly have either their selling privileges limited or even their account suspended until they provide Amazon with proof of insurance.
Can non-US Amazon sellers buy product liability insurance for Amazon in the United States?
Businesses wishing to sell their products on Amazon in the US are required to purchase product liability insurance if they earn upwards of US$10,000 each month through selling their products. According to our research, the Amazon Services Business Solutions Agreement doesn’t distinguish between companies that are based in the US and companies that are selling cross-border in the US. As such, sellers outside the US also have to buy product liability insurance if they are to sell their products through Amazon in the US.
Below we introduce several companies that provide policies and guidance for clients seeking to purchase a product liability insurance that may best suit their needs.
Do cross-border Amazon sellers need product liability insurance?
Amazon sellers should follow the instructions for product liability insurance according to the following:
a. Amazon Services Business Solutions Agreement for the US, Canada, and Mexico
b. Amazon Services Europe Business Solutions Agreement for the UK, Germany, France, Italy, Spain, Netherlands, Sweden, and Poland
c. Amazon Services Business Solutions Agreement for Australia
We couldn’t find any source stating that the insurance requirements do not apply to cross-border Amazon sellers. Therefore, cross-border Amazon sellers should obtain product liability insurance according to Amazon’s requirements, or get in touch with Amazon to clarify if they need one.
How much does product liability insurance cost for Amazon sellers?
The cost for Amazon liability insurance policies largely depends on the sellers’ estimated annual revenue. According to several sources, including this one, the average cost is around USD 500-1,000 per year for USD 1 million general liability insurance policies.
We suggest sellers shop around for more carriers to get different quotations and choose the policies that best fit their business.
What are the benefits for Amazon sellers of having product liability insurance?
The cost of a product liability insurance policy is definitely cheaper than the compensation obligations that might arise by bodily injury or financial loss to the customers, let alone the relevant legal costs.
Additionally, Amazon could remove your products or suspend your seller account, if you can’t prove to have obtained the required insurance policy.
Are there different types of liability insurance?
There are many types of liability insurance such as:
- Product liability insurance
- Public liability insurance
- Environmental liability insurance
- Professional indemnity insurance
- Employers liability insurance
- Directors and officers’ liability insurance
Amazon sellers need to ensure that they purchase an insurance policy to protect their business and interest, according to Amazon’s requirements. We briefly explain this subject below.
Commercial General Liability Insurance
Amazon US and AU sites require sellers to obtain commercial general liability insurance. Generally speaking, commercial general liability insurance covers public liability and product liability.
Both product and public liability insurance cover defense costs and the business’s legal liability to third parties. In particular, product liability covers third-party property damage and/or bodily injury caused by defective products, wrong advertising, insufficient label instructions, or other matters that are related to the product itself.
A product liability policy is suitable for Amazon sellers that sell physical products including clothing, electronics, small accessories, and other types of consumer products.
Public Liability Insurance
According to Amazon Services Europe Business Solutions Agreement, which applies to sellers selling on Amazon EU and UK sites, sellers have the responsibility to purchase public third-party liability insurance in connection with each Amazon Site.
The public third-party liability insurance policy should cover liabilities related to the operation of the sellers’ business in connection with the Amazon Site, including products liability and bodily injury.
