When should you get a pro merchant account & do you need insurance?

When should you get a pro merchant account & do you need insurance?

I have had  a few requests lately to do some more posts about the “business side” of selling on amazon, and that is what today’s post will be about.  I will start by doing a quick comparison of the amazon seller account types, and then discuss if insurance is required to sell on amazon.

First, when does it make sense to upgrade to a pro merchant account? This account costs $39.99 per month, but it waives the $0.99 per item fee that is charged to individual seller accounts when they sell items.  It also comes with some additional benefits, one of which is being able to use Amazon Marketplace Web Services, which is required to use services such as Profit Bandit, Scanpower, and Inventory Lab.  If you ignore the other benefits of the pro merchant account and look only at the numbers, it makes sense to upgrade to a pro merchant account when you are selling over 40 items per month.  With an individual account, if you sell 41 items in a month it would cost you $40.59 in per item fees, and if you sell 41 items with a pro merchant account you would pay $39.99.  The more items you sell, the more that being a pro merchant will save you.

In my opinion, it makes sense to upgrade to a pro merchant account as soon as you will be selling more than 40 items in a month.  At this point it will definitely save you money.  It may even be worth upgrading sooner if you want to use some of the services mentioned above.  If you want further info on the differences in the accounts HERE is a link to amazon explaining the differences.   If you have further questions on this, feel free to reach out.

The second item for today is discussing insurance for pro merchant accounts.  Here is a direct copy/paste from amazon regarding the insurance requirement, HERE is the source of the info below.

“Pro Merchants who sell on Amazon.com must provide proof of Commercial General Liability insurance. This insurance, obtained at the merchant’s expense, covers up to $1,000,000 per occurrence and must include products, bodily or personal injury, property damage, and other requirements as stated in the Amazon Services Business Solutions Agreement. The insurance must indicate that Amazon.com and its affiliates are added as additional insured.”

I was not aware of this requirement until recently, but upon finding out about it, I quickly obtained the insurance to comply with the rule.

It is important to treat selling on amazon as you would treat any other business, and having the necessary insurance is part of the deal.  The key component of this insurance is product liability insurance.  If for some reason you sell a product that ends up causing physical harm to a person and they are looking to sue someone, it is possible they will come after you.  They would likely come after amazon, the manufacturer, and you to see where they have the best chance of winning their lawsuit.  I don’t have any example lawsuits, but I would bet that at some point there has been an attempted lawsuit against an amazon seller for a product the seller sold on amazon.

I am not really a fan of having to purchase insurance, and I really consider it a “necessary evil” to be protected and stay within the amazon guidelines.  I would be even less of a fan of being on the hook for hundreds of thousands of dollars (completely hypothetical numbers)  if someone was to get seriously injured and win a lawsuit against me for a product I sold them.  Again, not sure what the odds are, but in this case I am going to err on the side of caution and get the insurance.

So, what does this insurance cost? The cost will vary depending on your level of sales volume, as it is largely product liability insurance.  So, the more you sell, the more potential liability you have, and the higher your insurance costs will be.  They asked me the question how much do you estimate your sales will be in the next 365 days? I answered with $400,000 and this resulted in me receiving a monthly insurance quote of  $106 per month.  I really don’t have a basis for comparison and this seemed semi-reasonable to me so I accepted the quote and went through with obtaining the insurance.

I obtained this insurance through a Wells Fargo business insurance agent.  He has provided insurance for other FBA sellers as well and knew exactly what was needed so he was able to get me setup in about 30 minutes.  It was a relatively painless process (except for of course that I will be paying an additional $1272 per year related to my business).

If you are interested in reaching out to the insurance agent I used, here is his name and contact information:

Jason Stephens



UPDATE 4/7/2014: I just been informed that Jason has been promoted and is no longer the proper contact for FBA insurance.  The new contact is Brent Cleveringa and his phone # is (612)215-0147.  I have struck through the original parts of this post that have been updated for those re-reading this. 

UPDATE 8/26/2014: I have just been informed that Brent is no longer the contact.  I am working on finding out who the best contact is, and will update this post when it is known.  If you happen to know the best contact at Wells Fargo, please let me know.    

If you let him know that Ryan Grant from www.onlinesellingexperiment.com referred you I will receive a $25 Target Gift Card for up to 10 referrals (it won’t cost you any extra, it’s just a bonus Wells Fargo pays).  If you end up using Jason Brent for your FBA insurance needs, it doesn’t matter to me or not if you let him know I referred you, I would share his contact info either way.

I was very happy with the level of service that I received from Jason, but I can’t comment at all on the competitiveness of the price.  I reached out to a couple of local insurance agents and they didn’t have a policy that met the needs of selling on amazon.  I wanted to get a policy in place, and I just accepted their quote.  If you know of other options for FBA insurance, please share them in the comments! I would love to know what they are, and perhaps it will help others who don’t yet have insurance as well.

To close this out, amazon policy states that pro merchants need to have the previously discussed insurance.  Personally, I like to keep amazon as happy as possible by following all of their rules, as the lifestyle selling on amazon allows me makes me happy.  I don’t want to jeopardize my ability to sell on amazon, or my future due to getting sued because some fluke accident happened with a product I sold.  The liability protection that my LLC provides, in addition to the protection this insurance policy provides, allow me to have peace of mind.

For anyone reading this who already has a similar policy, if you would be willing to share what company and/or how much you pay per month, I would love to hear it via email or in the comments.  If you have any other questions or comments, please leave them below or send me an email at grant.ryanj@gmail.com.


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