Businesses both big and small need insurance and Amazon businesses are no exception. As your business grows, so will your level of liability. The right insurance policies can help give you much-needed peace of mind as you continue to sell and scale your Amazon business. But, which insurance policies do you actually need?
It’s important to remember that every Amazon business is different. Insurance policies that may work for a retail arbitrage seller may not work for a private label seller. Amazon businesses with multiple employees may need additional policies that sellers who run their businesses themselves don’t yet need. To help you choose the right policy for your business, read on for an overview of insurance policies and which policies are best for which sellers.
Insurance Basics to protect your ecommerce business
General Liability Insurance
General Liability Insurance is the most basic form of business insurance is designed to protect a company’s assets and pay for financial obligations due to losses from injuries, negligence, and accidents that could occur. A General Liability policy can protect the business from bodily injury, property damage, legal fees, judgments and any settlements that could be awarded should you be successfully sued.
Who needs a General Liability policy?
Easy answer is every business needs a general liability policy. We live in a sue crazy society these days and even if you think your business is low risk is it really worth not paying the small premiums associated with a policy? Typically these annual premiums range from $500 to $2,000 depending on the type of business and risk associated with it specifically. That’s a lot less than the cost of a potential lawsuit, in the hundreds of thousands if not into the millions, plus the cost of hiring legal council, which is typically included in a general liability policy.
Products Liability is generally included along with a General Liability policy at limits similar if not matching. This coverage provides the manufacturer or seller liability in the event that one of their products was to cause bodily injury or property damage to a third party due to a defect or malfunction of the product. This could be a product of any type, food, machine, toy, or any other good sold by the business to the public. Types of typical products liability claims include: Manufacturing or Production Flaw, Design Defect, Defective Warning or Instructions.
Is your policy rated correctly?
Many ecommerce businesses have a current General Liability policy in force, but how many of them are rated correctly? Not everyone that sells online should be rated as an Internet Retailer. If a seller is having their private label product manufactured overseas for them, they now become a manufacturer. They now have a huge products liability exposure, which is generally not there if a seller is just selling someone else’s product. If this is the case that seller may or may not have coverage from the company insuring them. Don’t have maybe insurance, make sure you are rated correctly and use an agent that knows the ecommerce business. If your agent doesn’t know the difference between FBA and FBM you might want to look for one that does.
Additional Liability Policies
To protect your business from more specific types of exposures, you may need to purchase additional liability policies. Since searching for policies can be overwhelming for many business owners, here is a breakdown of the additional policies sellers may need including Expense Defense by WELL Insurance which can protect your business in the event of an Amazon suspension. Regardless of the size or structure of your Amazon business, it’s important that sellers understand where and when additional insurance policies are necessary. While you may not currently need a workers compensation or ocean marine policy, for example, you may need them down the road as your business continues to grow.
Online Sellers Expense Policy (Amazon Suspension Insurance Policy)
This is the first ever insurance policy for Amazon.com sellers to pay for operating expenses should their online store be suspended. Policies start at as little as $92.80/month for $1,000/day in expenses, all the way to up to $10,000/day for $278.40/month. Policies also have money built into them to help pay for the reinstatement specialist that needs to be hired to get the account reinstated as soon as possible.
Even if a business does not own an automobile they need auto liability coverage. Ask these questions – Do you drive to the post office or UPS Store on company time? How about the bank? If the answer to these basic questions is yes, then that business needs to have, at minimum, coverage for Hired & Non-Owned Auto Liability, which would protect the business in the event that an accident occurred on company time.
Workers Compensation Insurance
Workers Comp is state regulated coverage that is required to help pay for any work related injury that may occur to an employee. These policies are rated based on actual payroll figures for the business.
A separate liability policy that provides excess liability should the business be brought into a lawsuit or facing a judgment in excess of what the general liability limits offer. Ex: If a business is facing a $1.5 million judgment because one of something they were legally liable for the general liability policy would pay the first $1mm and then the umbrella would kick in to pay the additional $500,000. If the business did not have an umbrella over the general liability they could be held responsible for the excess $500,000.
Cyber Liability Insurance
This policy is important for any business that uses any electronic information. That business could potentially be sued for data breach and other cyber crimes. This could include paying legal fees, judgments or settlements. Your general liability policy may not cover these properly. Cyber liability policies continue to evolve due to the ever changing nature of the threats. Not only do these policies pay for judgments and fees, they also help to repair the reputation of the business and or brand.
The basic ocean cargo policy covers ocean and air shipments, protecting the sellers merchandise for physical loss or damage from external causes, shore to shore.
EPLI – Employment Practices Liability Insurance
This is designed to provide coverage for claims or lawsuits brought against a business, its officers/directors, and or employees and managers for discrimination, sexual harassment, wrongful termination or any other employee related allegations that could arise.
Like the Amazon Marketplace, sellers’ businesses are constantly evolving. Therefore, your insurance needs are bound to change with your business. It’s best practice to go back and reevaluate your business’ insurance needs and policies every six months to make sure you’re not paying for policies that you no longer need and to make sure you’re covered for any new liabilities you may be taking on.