Getting to Grips with New Liability Insurance Requirements for Amazon Sellers
Editor’s Note: This is a guest post written by Scott Letourneau, CEO of NCP and Sales Tax System.
While Amazon has required sellers with over $10k/month in sales to have liability insurance for the last 10 years at least, it may well be true to say that it’s taken somewhat of a soft approach to enforcing this policy.
On the 1st of September, though, all that changed.
As part of their new Amazon Insurance Accelerator program, Amazon has new liability Insurance requirements for ALL sellers who cross $10,000 a month in sales, wherever they or their businesses reside. This update went into effect on September 1, 2021, and was announced to sellers in an email on August 10, 2021, as part of their recently updated A-Z guarantee program to protect sellers better.
To get a better understanding of these new liability Insurance requirements, we spoke with Scott Letourneau, CEO of NCP and Sales Tax System, who helped answer the below questions and outline what is required from Amazon sellers.
What will sellers need to do now according to Amazon’s new insurance requirements?
In short, sellers will need to:
- Obtain a Commercial General Liability policy of at least $1,000,000
- That policy must also include Products Liability coverage (Products/Completed Operations)
- Get an insurance policy that is an Occurrence Form Policy
- Have a Company Rating of A- or better
- Have insurance that covers all sales from products listed on Amazon
- Name ‘Amazon.com Services LLC’ and its affiliates and assignees as additional insureds
- Ensure that if a deductible is included, it should be less than $10,000
- Match their company name and address precisely with that on their Seller Central Account
- Upload the COI (Certificate of Insurance) to their Seller Central account
What are the best insurance options for both U.S. based sellers and non-U.S. based sellers on Amazon.com?
U.S. sellers will have an easier time obtaining liability insurance to obtain the COI for Amazon. To ensure you are fully covered and meet all the requirements set out by Amazon, we recommend you work with an insurance company familiar with Amazon and its requirements as listed above.
A partial example of a Certificate of Insurance (COI).
Non-U.S.-based sellers may find it challenging to find local insurance providers in their country to obtain an insurance policy for selling on Amazon.com. We have found that sellers with sales over $3 million in annual turnover, or those selling a high-risk product such as supplements, exercise equipment, or children’s toys, may find it more challenging to get coverage from a provider in their country.
If this situation applies to you, Amazon’s Insurance Accelerator program has a few options to manage these challenges, and Marsh.com seems to be the best option for obtaining a certificate of insurance linked to your foreign entity or individual selling on Amazon.com. In addition, you’ll be pleased to hear that Marsh.com has plans to roll out more countries that will provide coverage, but not all of them.
So if you are in a country that does not provide coverage, your option is to work with a U.S. insurance provider, and we recommend well-insurance.com as they will be able to provide you with a certificate of insurance after you set up a U.S. company, U.S. address, and EIN.
Alternatively, a U.S. LLC is a common option for non-resident sellers that don’t have other insurance options.
Here at NCP, we can help provide those services for you so that you can obtain your certificate of insurance.
How long does it take to obtain a certificate of insurance?
The process to obtain a certificate of insurance may only take 2-4 business days, assuming you don’t have to make any changes by forming a U.S. company first.
The most critical step with the insurance provider is making sure you fill out their insurance application completely. When we spoke with Matt Lovell, the founder of Well Insurance, he said they can obtain the Certificate of Insurance after receiving the application, once the quote is agreed upon, and once the first payment is made. For Well Insurance, this process can take as little as 24 hours.
What happens if Amazon sellers are not in compliance with the new insurance requirements?
The insurance requirement has been in place for many years but never really enforced. But that all changed as of September 1st, 2021.
Now, insurance is required when you sell more than $10k in a month. While we expect Amazon to send out another notice shortly, giving sellers one more chance to get into compliance within 30-60 days, if you are not compliant after that notice then it is likely Amazon will suspend your account.
Additionally, even if you provide a COI soon after, the length of time to reactivate your account is unknown. It may take 24-48 hours, or longer.
Does Amazon have an FAQ area to help with any other questions I may have?
Yes, when Amazon announced the new policy and programs on August 10th, they set up a special area on the discussion boards to answer sellers’ questions about its insurance requirements.
What happens if my insured name does not match the legal entity on my Amazon account?
Having a mismatch between the names on your insurance policy and the name on your Amazon account will be an issue and may well be the reason why your account gets suspended. You will need the following to all line up properly:
- Legal entity name on your certificate of insurance
- Legal entity name on your bank account
- Legal entity name on your Amazon account.
- S. taxpayers, the legal name on your EIN should match also.
- The legal address should be the same on all of the above.
Why isn’t Amazon accepting my proof of insurance?
The most common reason for non-acceptance is the name on the certificate of insurance not matching the legal business name or address you have on your Amazon account.
Other reasons your account may become suspended include your policy not meeting Amazon’s requirements. Perhaps you did not use a carrier with an “A” rating with Standards & Poor or AM Best, or Amazon did not accept the file format you provided. The accepted file formats include PDF, DOCX, or DOC. It also cannot be larger than 50 MB and can’t be a photo image.
Scott Letourneau is the CEO of NCP and Sales Tax System. If you need support with a U.S. entity for your Amazon business, reach out to his team at support@launchwithconfidence.com, or see them at www.LaunchWithConfidence.com