What Type of Insurance Do You Need as a Seller on Amazon or Walmart?
If you’re a newcomer to selling on Amazon, or even if you’ve been selling on Amazon for a while and have only recently started to see your business grow, you might not have realized you need insurance to sell on the platform.
Amazon doesn’t require you to have insurance if you’re registered as an individual seller and making less than $10,000 in sales each month. But it’s mandatory for registering as a Pro Seller and for any seller making sales over the limit.
Meanwhile, though Walmart Marketplace doesn’t require its third-party sellers to have insurance, it’s still a smart move. Insurance covers any financial obligations you and your company might incur in case of accidents, injuries, or lawsuits.
If you’re lucky, you’ll rarely have to deal with any of those events. However, it’s better to be prepared than to risk losing thousands of dollars down the road.
But what insurance do you need for your eCommerce business, and how much does it cost? Read on for a detailed breakdown of your options.
Requirements for Amazon Sellers
Amazon has clear insurance obligations you must meet if you’re registered as a Pro Seller and/or exceeding $10,000 in sales a month. However, these requirements are buried in a long list of policies in the Program Policy page, so it can be hard to find them.
Amazon requires such sellers to carry insurance with at least $1 million in coverage. This coverage should have a minimum limit of $1 million per occurrence and $1 million aggregate limits. That means that, to qualify, insurance should pay out a maximum of at least $1 million for an individual incident and have a cap of at least $1 million for all incidents in a year.
Your insurance must include commercial general liability insurance and product liability insurance. General liability insurance, sometimes known as “slip-and-fall” or “all-risk” insurance, covers common third-party lawsuits over personal or property damage and bodily injury. Product liability insurance offers financial protection against harm caused by your products and is usually included when you get general liability coverage.
You’re also required to name Amazon and its assignees—individuals acting on Amazon’s behalf—as “additional insured” on your policy. This provision means your policy will protect Amazon when applicable.
If you participate in online arbitrage or wholesale on Amazon, you might wonder whether product liability insurance is necessary for your business, since you don’t design or manufacture the products you sell. However, once you meet the $10,000 threshold, Amazon still expects you to purchase the same coverage. You may not be held entirely responsible for damage caused by a product you sell, but you can still become involved in the lawsuit.
Automatic Coverage By Amazon
Amazon itself will automatically cover any claims under $1,000, which account for more than 80% of cases in their store. As long as your business follows Amazon policies and has valid insurance of its own, Amazon will not require you to reimburse them for these claims.
Recommendations for Walmart Sellers
Becoming a seller on Walmart is a more intensive process than becoming an Amazon seller. Walmart Marketplace sellers have to apply to join the platform by submitting a variety of tax forms, their planned integration method, catalog size, and more. This process results in a more curated list of third-party sellers on their platform.
However, unlike Amazon, Walmart doesn’t require their sellers to have insurance coverage. On the other hand, since Walmart is geared toward more experienced sellers than Amazon, Walmart likely expects their sellers to be covered.
As a Walmart Marketplace seller, you should at minimum invest in general liability insurance to cover third-party lawsuits, product liability, personal injuries, and advertising injuries (which may include lawsuits over copyright infringement or false claims about a competitor). Most retail businesses choose policies with a $1 million per-occurrence limit and a $2 million aggregate limit when they first insure their business.
Further Types of Insurance
Depending on the scale and style of your eCommerce business, you may consider other types of insurance. A Business Owner’s Policy (BOP), which includes general liability insurance and commercial property insurance, might be desirable if you need to insure an office or warehouse.
Commercial umbrella insurance, meanwhile, boosts coverage on your other insurance policies once you’ve reached the limit on a claim. This type of insurance is best for covering customer injury, property damage, and employee injury lawsuits, all of which may exceed the limit on a general liability insurance policy.
Depending on the risks associated with your products or industry, your business may require umbrella and/or excess liability insurance to meet the minimum $1 million requirements set by Amazon.
As your business grows, you may also want to consider forming an LLC or Limited Liability Company to protect your personal assets. If your business is an LLC, a lawsuit that names the business will not involve your personal assets. A relatively new form of coverage is Amazon suspension insurance. This type of policy covers your expenses in the case of an account suspension from Amazon.
The Cost of Insurance for eCommerce Businesses
The average cost for insurance for Amazon and Walmart sellers is around $500-$1,000 per year. Product liability insurance, the most important type of insurance for marketplace sellers, varies based on your business’s annual revenue.
If you opt for a Business Owner’s Policy (BOP) to insure your commercial property as well as having general liability coverage, you will likely pay between $600 and $1,200 a year. The cost varies based on the value of your commercial property.
Commercial umbrella insurance, which provides extra liability coverage for the most expensive lawsuits, costs around $760 a year for most retail businesses. The cost for commercial umbrella insurance is added onto the price of your general liability insurance or BOP.
To save money on your insurance, try to bundle your insurance policies if you purchase multiple policies from the same provider. You can usually also save by paying your annual premium upfront rather than in monthly installments.
Finally, make sure to proactively manage your risks by thoroughly vetting your providers and manufacturers, creating procedures and reviews for marketing materials, and providing safety training to your employees. A clean claims history will afford you lower rates.
Next Steps
If you sell on Amazon, you will need to provide them with a certificate of insurance as proof of your coverage. Make sure to tell your insurance agent that you’re an Amazon seller so they can help you check whether your policy is in compliance.
If you sell on Walmart, your business insurance should be part of your business plan. Walmart has high standards for its sellers, and a complete and proactive business plan can help you get accepted and stay on top of the platform’s requirements.
Insurance may be an unfamiliar aspect of online selling to many young businesses, but it doesn’t have to be complicated. Insuring your business can give you peace of mind and should be part of a smart business plan.
At Optimyze Digital, smart business plans are our bread and butter. We develop digital strategies tailored to achieve your goals and accomplish your mission. Get in touch with us today to find out how we can help you grow your business to new heights.