Why Amazon sellers need insurance

If you’re an Amazon seller, chances are you’ve noticed some seismic changes across the e-commerce landscape these last few years.

Online retailers saw a significant uptick in sales during the COVID-19 pandemic as more and more customers swapped traditional brick-and-mortar shops for virtual shop fronts.

It’s trend that seems set to stay. With online making up 23% of retail sales in the UK, consumers have embraced the speed and convenience of shopping online.

And with global ecommerce giant Amazon retaining its crown as the UK’s leading online marketplace, that’s nothing short of good news for your bottom line.

That said, there’s a balance to be had. If something goes wrong and your business takes a hit, you could see your funds drain away quicker than you can say Jimminy Click-it.

What’s more, UK-based sellers should bear in mind that Amazon’s insurance requirements are different depending on how you sell and whether you do it on their UK or US website.

So, now might be the time to bag a little something for yourself for a change. Something in the shape of online retailers' insurance perhaps? Here’s why.

Who'd have thunk it?

If the pandemic has taught us anything, it’s to expect the unexpected.

Like a kitchen gadget that sparks a fire in someone’s home after its batteries overheat. Or a customer who sues you after a heavy ornament slips out of its safety packaging and injures their foot.

Thankfully, accidents like these aren’t in the main. But it takes only one of them to make a sizeable dent in your business.

Rightly or wrongly, you’ll have to defend yourself – and pay out of your own pocket to do it, too. Plus you’ll need to figure in court costs, legal representation and possibly also compensation. It could amount to several £thousands.

Unless you have an online retailers' policy, that is, that can do all that for you.

Why do Amazon sellers need insurance?

As a third-party seller, you can’t assume the platform you sell on will pick up your legal tab if you get sued. Or that the injured party will chase after the bigger boys for compensation, and not you.

And if you occasionally ship to countries that err on the litigious side, like the US, there’s every reason to be careful there, too.

That’s where online retailers' products liability insurance comes into play. It covers you if someone claims against you for damages. Because something you’ve sold them has injured them, damaged their property, or made them sick.

You'll have a case to argue – but you don’t have to do it yourself. Products liability insurance covers the costs of a lawyer to represent you in court. If it turns out you have to pay damages to the injured party, it’ll cover that too.

Do Amazon sellers need insurance?

According to Amazon’s sellers’ agreement, “you will defend, indemnify, and hold harmless Amazon, our officers, directors, employees, and agents, against any third-party claim, loss, damage, settlement, cost, expense or other liability.”

It's a mouthful for sure.

It means that if you’re an SME that's selling and dispatching products using Amazon’s website or services, and something goes wrong, Amazon won’t take responsibility. The sale is between you and your customer. And so the buck stops with you.

Sure, Amazon’s terms can be tricky to decode. But they've done the maths. They know that the more businesses that sign up to their platform, the greater their chances of running into litigation. It’s why they have such strident Ts&Cs in the first place.

And why if your turnover tips over a certain amount, Amazon stipulates certain insurance requirements.

Insurance requirements for Amazon UK sellers

If you’re a UK-based online retailer selling on Amazon.co.uk or its European platforms (including Amazon France, Germany, and Spain), then online retailers’ insurance can help protect your business.

How much insurance cover you'd need, though, depends on your sales turnover and on Amazon’s requirements.

According to Amazon.co.uk, Fulfilment-by-Amazon (FBA) sellers who earn over £4,000 per month over three consecutive months need:

• Products and public liability insurance (with a minimum of £400,000 cover for each and every claim)
• Amazon named as an ‘additional insured’ on their policy
• To show proof of insurance if asked to by Amazon.

Needless to say, the insurance must be valid. That is, it should cover the dates you've been trading and have been bought from a reliable insurer.

It sounds like a huge ask. But having online retailers’ insurance is worth it when you’re selling on Amazon UK, regardless of whether you’re an FBA seller or not. It covers their back as well as yours.

And it means you won’t have to dig deep into your savings if a customer accuses your products of causing them loss, damage, or injury. If things escalate and sparks start to fly, you can bank on knowing your insurer will step in to settle the claim.

Insurance requirements for Amazon US sellers

Unsurprisingly, Amazon.com has stricter insurance requirements for its UK-based sellers. Specifically, those who earn over $10,000 (roughly £7,850) per month:

• Products and public liability insurance (with a minimum of £1m cover for each and every claim)
• A maximum deductible of $10,000 on their certificate of insurance
• ‘Amazon.com Services LLC. and its affiliates and assignees’ named as ‘additional insureds’ on their policy.

If your sales turnover is less than $10,000 per month then Amazon US doesn’t require you to be insured. But, as selling to the US can be risky, we’d recommend it anyway.

If you sell on both the UK and US site, then some insurers will allow you to buy a US extension on your UK policy. Your business must be based in the UK, however, and your US turnover can't exceed £1 million.

Tough break

True or false?

Because of how they do things, most Amazon sellers have little to no contact with the public or anyone else connected to their business. So there’s no need for insurance there.

False.

You might pack and ship your products from home. But you'll still have couriers arrive at your door (and often in a rush). And though you might not be meeting face-to-face with suppliers or customers now, there’s every chance you might do in the future.

Public liability insurance covers you if a member of the public gets injured when coming a cropper with your business.

So, if the postie trips over a loose paving slab in your driveway and breaks a hip, or your pop-up stall topples over and takes someone down with it, you’re not left shouldering the bill. Because public liability covers occasional selling at events and markets, too.

By the way, if you’re a Fulfillment by Amazon (FBA) seller, where Amazon store, pack, and ship your goods for you, you might find public liability useful. You'd still have to send your stock out to Amazon so they can store it. And your products will still be packed and handled by Amazon’s workers before they’re shipped.

Good buy or goodbye?

Lastly, it’s worth thinking about one of your most important assets: your stock. Without it, you can’t sell. And if you can’t sell, you don’t have a business.

If you store, sell, pack, and ship most of your products from home, you might assume your home insurance policy would compensate you if any of it gets lost, damaged, or stolen.

Except there’s every chance it won’t. Home insurance is designed to cover your home contents. Insurers generally won’t cover your business losses as well.

Stock and property insurance, on the other hand, takes care of any stock or equipment connected with your business.

It pays to repair or replace it if light fingers or a burst pipe mean you don’t have any stock to sell. And it also covers the things you'd need to sell in the first place (your PC, printer, desk etc)

One more thing to wrap up

We know buying online retailers’ insurance can be a tough sell. Especially if you’ve only started trading relatively recently and your turnover’s still low.

Deciding how much cover you'd need can be tricky, too. If you don’t meet Amazon’s FBA seller requirements, but you still want protection, how much should you get?

Most online retailers' public liability policies include cover for up to £1 million as standard, but it’s worth having a conversation with your insurer or broker if you’re unsure of anything.

For more guidance, check out our info on online retailers' insurance. Or call the team up on 0345 222 5391 if you'd like to talk anything through.

Image used under license from Shutterstock.