Millions of items on Amazon are not sold by Amazon itself but by Amazon third party sellers or e-sellers. Third party sellers are independent small businesses who use Amazon’s portal as their shop window. This allows them to access millions of global shoppers. Amazon third party sellers create their page, monitor their inventory, control pricing and more. We know following our previous article that they must buy some liability insurance.
Today we would like to bring more details about the type of liability insurance Amazon sellers need.
I – What type of third party liability insurance?
Questions arise about the type of insurance e-sellers need to buy because Third party Liability insurance is a generic term. Do they need a general liability insurance, a combined general liability insurance, a public liability insurance, a product liability insurance?
It could be confusing. Different Amazon Services Business Solutions Agreements from different countries have varied terms within the insurance article. (See table below in the article)
Depending on the country, Amazon will use the term Commercial General Liability (CGL) including product liability or the term public liability including product liability. So, what do the third party sellers need to buy if they want to sell on Amazon?
While we are still recommending every businesses to buy a public liability insurance (possibly included in the CGL). Your ‘must have’ insurance, to comply with Amazon’s contractual requirement, is the product liability insurance.
A product liability insurance will cover your company (and Amazon as additional insured) against the essentials. Including bodily injury or property damage suffered by a third party because of your product.
In Hong Kong, e-sellers could buy the whole CGL insurance including the public liability side. However, in most of the case the territoriality of the public liability cover will be limited to Hong Kong. Or they could buy a product liability on stand alone. Despite some slight difference in wording with a CGL policy, the product liability on stand alone is sufficient to answer Amazon’s requirements.
II – When do third party sellers need to buy the third party liability insurance?
If you are a professional seller (or pro-merchant) and if your gross revenue exceeds the threshold amount, specified in the table below then, you must buy the product liability insurance.
Unlike the individual sellers, who pay a price per item sold on Amazon, professional sellers pay a fixed monthly subscription. This is without any regard to the number of items sold per month
III – What is the insurance limit requested?
From the table below, we could see that insurance limits could differ from a country to another. If your products are sold in different countries, your insurer should therefore specify a different limit insured per country. It should then be specified in your contract the following:
- Limit of insurance for US will be USD 1,000,000 per occurrence and in aggregate.
- Limit of insurance for France will be Euro 500,000 per occurrence and in aggregate.
IV – What else does Amazon require?
Amazon requires that they are also insured in your policy. Your liability insurance will therefore be extended to protect Amazon. This is in case a claim is filed against Amazon for a product you have distributed.
In terms of proof of insurance, Amazon requires an insurance certificate (in original) signed by your insurer. This must name Amazon as additional insured.
V – Does Amazon Check if you have cover?
From this article, Amazon has about 2 million active small and medium size businesses selling items on their platform. Asking, checking and classifying the insurance certificates of each business would be too time consuming for Amazon. However, the future might involve a more automatic process where sellers will have to upload an insurance certificate.
So don’t wait for Amazon to ask you for the insurance proof. It may take a couple of days to write the policy for a document demanded with 24 hours notice. Last but not least, product liability insurance is an essential insurance if you sell products globally. You may be more exposed than you think to a lawsuit or legal proceedings.
Still having question about liability insurance,
If you are still unclear of what type of liability insurance you need to buy, please send us an email with your contact details.
You can also visit our website to find out about the other insurance services we offer