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Amazon Product Liability Insurance

November 26, 2022

Think about it. Someone purchases your lipstick and the next day wakes up with an allergic reaction. They head to the ER and guess what – they were allergic to the makeup! You could be sued to pay for the medical bills. After all, it was your product! Did you hear about the exploding hoverboard purchased on Amazon? Between the property damage and the injured customer, Amazon denied responsibility for the expenses:

In August 2021 Amazon announced:

“Amazon will resolve and pay for valid property damage and personal injury claims against sellers under $1,000 as a concession to customers. Claims under $1,000 account for more than 80% of cases in our store, and Amazon will bear these costs and not seek reimbursement from sellers who abide by our policies and hold valid insurance.”

What is Product liability insurance?

Amazon Product Liability Insurance will protect you If you sell a product to your consumer, and it caused property damage or injury.

Although your item may not be “dangerous” it does not mean that you don’t have liability. Manufacturer’s defects and poor instructions could lead to defects. All it takes is ONE defective item to put you out of business.

What do you need to do?

If your gross earnings are over $10,000 / month, you will need $1 million in liability coverage, you will need Amazon seller Insurance, and will need to add Amazon as an additional insured on the policy.

liability tips amazon seller

Good news or bad news?

To prevent things like this from happening, Amazon is now making sellers (who gross more than $10,000 monthly) add liability coverage. Your liability insurance policy will cover the claim. If you don’t have insurance, you would have to cover those costs yourself. The result could be catastrophic.

That’s why it’s always a good idea to have liability insurance for whatever you sell, regardless of your gross sales earnings.

For sellers who have valid insurance (or claims up to $1000):

Amazon will pay for claims up to $1000.00

For sellers who do not hold insurance and/or for claims of higher amounts (over $1000)

Sellers who do not comply, or for claims exceeding $1000.00 – expect a payment demand from Amazon!!  (We can only imagine the impact of non-compliant sellers)

Need more information? Here’s the full link from Amazon! Click here!

Some questions about Amazon Seller Insurance:

  1. While Amazon has forced sellers to get insurance by September 1st, 2021 – it’s been hard to enforce. But over the past year, we’ve seen Amazon give sellers short windows of opportunity to obtain liability insurance or risk an account suspension. Will proof of insurance automatically reinstate accounts?
  2. Amazon states, “These concessions will not affect your order defect rate, and you will be kept informed at every step so you can continue to ensure your products are safe.”  Can we truly trust that these will not be strikes against A to z claims?
  3. What type of proof will Amazon demand from customers to show damages?

Final Word:

To succeed on Amazon, it’s critical to have an Amazon product liability insurance policy. With a thriving e-commerce marketplace and a prominent litigation mentality, you need to protect your business.  At AIA we support sellers on their Amazon journey. With our team, we can help you with Amazon from A to Z – from compliance challenges to buying and selling Amazon accounts. Join us on our journey! 

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