amazon seller insurance

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

April 4th, 2014

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 amazon seller 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 amazon seller 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.”

So it is clear, there is an amazon insurance requirement. 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 amazon seller 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

(612)215-6740

Jason.A.Stephens@wellsfargo.com

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 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 amazon insurance is required.  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.

 

Read More

52 responses to “When should you get a pro merchant account & do you need insurance?”

  1. Tom says:

    Hi Ryan, I have been reading your blog over the past few weeks and I think it’s fantastic. I have been selling on ebay on and off for 12 years but just recently found out about selling on Amazon with FBA. Your blog has inspired me to jump in and give it a try. I started slowly in January and just in the last month have really been trying to ramp things up. It’s not much compared to your numbers but I’m hoping I’ll get there… since the beginning of the year I’ve had over $3000 in sales with $1000 of that being profit. Just wanted to say thanks for inspiring me. I was also curious if there is any way to contact you directly? I wasn’t able to find an email on the site, I just had a question I wanted to ask you directly. Thanks again!

    • Tom says:

      Well now I feel a little dumb, I just found your email on your about me page…. seems logical!

      • Ryan Grant says:

        haha no worries, I should possibly add a contact me page to make it a little more obvious.

        Best Regards,
        Ryan

    • Ryan Grant says:

      Hey Tom,

      That’s great to hear, it sounds like you are off to a great start! Based on your second comment it sounds like you found email.

      Best Regards,
      Ryan

  2. Mark says:

    Awesome post Ryan.

  3. Denise says:

    I purchased a Liberty Mutual insurance policy though a local agent recommended by a large eBay / AZ seller. Cost was $500 – I was told most insurance companies don’t want to sell a policy for less than that. For $500, I maxed out liability insurance and have some inventory coverage.

  4. Marie says:

    Ryan, Your letters are very informative. In comment from Denise on insurance: is $500 for one month or annual. Also would like to know if this was priced by yearly sales volume. Thank you. Marie

    • Ryan Grant says:

      Hi Marie,

      I am pretty sure the $500 is an annual charge, and I would guess it has to do with sales volume. Hopefully Denise will see this comment and be able to respond, if not I will probably send here an email in a week or so to ask.

      Best Regards,
      Ryan

  5. k.hora says:

    Looks like you’ve joined the $10k/mo club (3 consecutive month).

    Thread: Insurance Requirements for FBA; PM accounts
    https://sellercentral.amazon.com/forums/message.jspa?messageID=3416

    I agree that insurance is an necessary evil. Those that are starting with the intent to do FBA full time might want to look into Corp/LLC and insurance from day one. (those starting on a bootstrap budget with no personal tangible asset, well, you probably don’t have much to lose if someone sues you; BTW, if you live at home, parents own the home, and you are conducting FBA related activity at home, your home will potentially come into play in a liability lawsuit)

    (general biz insurance info only)
    General Business Liability Insurance – How it Works and What Coverage is Right for You
    http://www.sba.gov/community/blogs/community-blogs/business-law-advisor/general-business-liability-insurance-%E2%80%93-how-it-w

    Would have been nice to know the actual insurance company as well. (or at least the list of available insurance companies within your budget) No sense using WF as agent if the companies offered are ones I won’t use due to difficulty in obtaining an insurance claim payout.

    Wells Fargo – Business Liability Insurance
    https://www.wellsfargo.com/biz/insurance/property_liability/liability/

    • Ryan Grant says:

      Hello,

      Thank you for sharing this info! The link to the policy that I share above does not specify a sales requirement, and is the more conservative of the 2 posted amazon policies. That was my reasoning for including the links that I did, and I would recommend individuals contact amazon directly if they are in doubt of whether they need insurance as a pro merchant or not.

      My policy is through CNA insurance. Who do you use for insurance for selling on amazon?

      Best Regards,
      Ryan

      • Yaya says:

        There is a sales requirement or if AZ request you have insurance, you have 30 days to get it. It is not a blanket requirement for Pro accounts. It was even posted on the seller board by an AZ rep.

        Great blog. I just found it today and have been reading through many of your post.

        • Ryan Grant says:

          Hey Yaya,

          Glad you are enjoying the blog! Thanks for your comment, and parts of the policy are open to interpretation as it says slightly different things on different pages. The way I read the beginning of the first link I provided states, “Pro Merchants who sell on Amazon.com must provide proof of Commercial General Liability insurance.” I realize this is contradictory to the sales requirement on a different page, but I would err on the side of conservatism unless you have something in writing from amazon.

          Best Regards,
          Ryan

      • k.hora says:

        I currently have no info for specific FBA insurance agent/carrier. (which is why I’m reading your stuff) 🙂

        Possible future O$E topic: “How To”: deal with a “What If” situation. Topic idea courtesy of Duane Malek.

        What if you can’t work (injury/illness)? How to take care of you/family. (eg: disability insurance)

        What if you can’t work (injury/illness)? How to take care of biz. (eg: spouse? siblings? biz partner?)

        What if you can’t work (old age)? How to pay for it now. (eg: retirement fund (eg: IRA, SEP), nursing home cost (eg: ??))

        What if Uncle Sam is taking too much from you? How to lower income tax liability. (eg: your retirement fund (eg: IRA, SEP), kids college fund (eg: 529 plan))

        Duane Malek (Fast Turn Radio 04/09/14)
        http://www.spreecast.com/events/fast-turn-radio-040914

        • Ryan Grant says:

          Thanks for the suggestions, I will definitely take these into consideration for future posts.

          Best Regards,
          Ryan

  6. Lei says:

    Ryan,

    I was told by another friend about the liability insurance last week and went back to read Amazon’s Terms and Conditions. My friend said someone had talked to an Amazon Rep about the threshold in getting the insurance coverage. The Rep told him or her that it was $10K in revenues for three consecutive months. I’ll definitely look into it more and thanks for sharing Jason’s info with us.

    The other big question is on sales tax collection. It’s another necessary evil for sure. How are you dealing with it?

    Thanks for all you do. It’s one of the most helpful and giving blogs on this topic.

    Lei

    • Ryan Grant says:

      Hi Lei,

      I have heard about that from others as well. The link that I provide in the post says that pro merchants have to have insurance and does not specify sales limits. I included the link I did above as it is the more conservative of the policies and is currently visible on the website. As a result, unless individuals are specifically told (in writing preferably) I would follow the more conservative of the policies.

      Best Regards,
      Ryan

      • Yaya says:

        I just clicked on the Business Solutions agreement and it is in writing about the threshold. Once you meet that threshold, then the other link your provided comes into play.

        • Ryan Grant says:

          Hi Yaya,

          Thank you, I have seen this as well and personally I don’t interpret it the same way. I read “Pro Merchants who sell on Amazon.com must provide proof of Commercial General Liability insurance” on one page and that seems pretty clearly stated. I know there is a policy that includes the sales threshold in the Business Solutions agreement, but unless you personally have something in writing from amazon I would tend to err on the side of being more conservative. I would encourage everyone reading this to do their own research and decide what is best for their business after reading through the links provided in the post and in the comments.

          Best Regards,
          Ryan

  7. Zoli says:

    Hey Ryan,

    Just wanted to post where everyone can find the info regarding the insurance limits. I had to sign into my account to find it but once you’re in your account, go to:

    “Seller Central Help: Account Settings: Reference: Policies and Agreements: Amazon Services Business Solutions Agreement”.

    Here’s the actual bullet point from that page:

    9. Insurance.

    If the Sales Proceeds from Your Transactions through either the WebStore Service or the Fulfillment by Amazon Service exceed the Insurance Threshold during each month over any period of three (3) consecutive months, or otherwise if requested by us, then within thirty (30) days thereafter, you will maintain at your expense throughout the remainder of the Term commercial general, umbrella and/or excess liability insurance with the Insurance Limits per occurrence/aggregate covering liabilities caused by or occurring in conjunction with the operation of your business, including products, products/completed operations and bodily injury, with policy(ies) naming Amazon and its assignees as additional insureds. At our request, you will provide to us certificates of insurance for the coverage to the following address: c/o Amazon, P.O. Box 81226, Seattle, WA 98108-1226, Attention: Risk Management.

    If you scroll further down on that page it talks about “threshold” limits. Here’s what it says just to make it easy on everyone:

    “Insurance Threshold” means the applicable one of the following:

    Ten Thousand Canadian Dollars ($10,000) (if Your Elected Country is Canada),

    One Million Japanese Yen (¥1,000,000) (if Your Elected Country is Japan),

    Ten Thousand U.S. Dollars ($10,000) (if Your Elected Country is the United States).

    Thanks again for all the great info you provide! Keep up the great work!

    • Marie says:

      Does this mean that you are covered for liability up to that point? Less than 10,000 in three months?

      • Ryan Grant says:

        Hi Marie,

        I can’t say definitively as I am not able to provide legal advice, but I should now be covered for product liability among other things. I am just sharing the information that I have found and the decision I made based on that. Let me know if you have further questions.

        Best Regards,
        Ryan

    • Ryan Grant says:

      Hi Zoli,

      Thanks for sharing!

      For anyone reading this comment, I would just caution you about relying on that 100%, as the link that I include in the post also links to amazon policy and does not state any sales threshold. I realize the links might be contradictory, but in certain cases it is better to be safe than sorry.

      Best Regards,
      Ryan

  8. Ryan,

    As much as you’re defending your position as “the most conservative” position – the one that protects you the most (which is a fair position to take), it’s the wrong position to take unless you’re making more than 10k in revenue per month. It’s just money spent to no good end, and I would recommend you cancel your insurance until you do hit the 10k threshold per month.

    Why? The link you keep referring to in your post has this text clearly marked at the bottom:
    “For a complete list of the insurance requirements, please see the Amazon Services Business Solutions Agreement.”

    If you consult the Amazon Services Business Solutions Agreement (as directed) for the *complete* list of insurance requirement, and not a carefully crafted *excerpt* (Note: said excerpt crafted by Amazon’s lawyers and is “the most conservative” (read: easily construed to have more sellers have Commercial Insurance – which protects Amazon’s interests moreso than the Seller’s Interests) excerpt they can post on their website, you’ll find (in writing) Section 9, which reads, in full:

    9. Insurance.

    If the Sales Proceeds from Your Transactions through either the WebStore Service or the Fulfillment by Amazon Service exceed the Insurance Threshold during each month over any period of three (3) consecutive months, or otherwise if requested by us, then within thirty (30) days thereafter, you will maintain at your expense throughout the remainder of the Term commercial general, umbrella and/or excess liability insurance with the Insurance Limits per occurrence/aggregate covering liabilities caused by or occurring in conjunction with the operation of your business, including products, products/completed operations and bodily injury, with policy(ies) naming Amazon and its assignees as additional insureds. At our request, you will provide to us certificates of insurance for the coverage to the following address: c/o Amazon, P.O. Box 81226, Seattle, WA 98108-1226, Attention: Risk Management.

    There you have it – in the document that Amazon points you to for the Full and Complete Conditions, it says 10k per month. Anything less than that, and you are unequivocally, and in writing, home free – UNLESS they specifically *ask* you for insurance, at which time, you are compelled to *go get it* within 30 days (of being asked OR of hitting 10k/mo.)

    It’s not ambiguous, and your interpretation (while it works for you and your personal level of risk tolerance) is wrong.

    The fulltext of the Policy (which is what you’d use in court) is clear and unambiguous.
    Within 30 days.
    If Amazon Asks.
    OR
    If you exceed 10k/mo.

    • Ryan Grant says:

      Hey Jonathon,

      Thanks for pointing that out. For anyone deciding whether or not you need insurance, make sure to read through the full policy to make sure you understand whether you need insurance or not.

      Best Regards,
      Ryan

  9. k.hora says:

    Please consider updating this topic. (maybe creating a new topic with more info?)

    I’m seeing different Spreecast people (eg: Duane Malek, Chris Green) commenting that all Pro Merchants now must have Commercial General Liability insurance.

    Possible future O$E topic: Errors and Omissions insurance

    reason for insurance
    (what could happen when you don’t have insurance and get sued for someone else’s counterfeit product due to the use of commingled inventory)
    http://www.startupnation.com/start-your-business/plan-your-business/third-party-sellers-need-to-rethink-theamazon-fba-program/

    The more that I read up on these things, the more I feel like I have to take this online selling seriously. (ie: this isn’t like selling your personal stuff on Craigslist / yard sale)

    • Ryan Grant says:

      Hello,

      Thanks for weighing in here! I absolutely agree that online selling is something that needs to be taken seriously. I will consider updating this post to include some of the information that has been shared in the comment.

      Best Regards,
      Ryan

  10. Joe says:

    Ryan, you mention Wells Fargo asked sales per year. Did they ask any other questions what products are you selling, new, used, refurbished,years experience selling online, etc?

    Does your insurance cover all your products on Amazon and/or EBAY?

    I contacted a different agent at Wells Fargo and they wanted 2 years experience and considered toys high risk and didn’t quote me a policy.

    • Ryan Grant says:

      Hi Joe,

      Yes there were many other questions that they asked covering everything from experience to the product mix. I specifically pointed out the sales one in the post, as that is something that needs to be given some thought before answering as opposed to being able to answer from experience like the other questions. The main thing they wanted to make sure I wasn’t selling were certain health supplements that make weight gain/loss claims. They didn’t mention toys as a problematic category.

      Best Regards,
      Ryan

  11. David says:

    I read a recent post in the yahoo FBA Forum from someone who posted the following:

    “I just talked to Chris at Wells Fargo but wasn’t positive. Wells Fargo seems to limiting their exposure with online selling. I was told that you need 2 years experience selling online which rules me out since I am relatively new.”

    • Ryan Grant says:

      Hi David,

      Thanks for sharing this info. I don’t recall being asked the 2 year experience question, but I possibly was.

      Best Regards,
      Ryan

  12. David says:

    Oh, I forgot to add this from the post also:

    “He mentioned as an example they are not insuring for toys as choking hazard and other categories. I assume groceries would be a problem also”

    • Ryan Grant says:

      I will definitely have to look into this. I believe I mentioned I was selling in all of these categories when I spoke to them, but I will be sure to confirm to make sure I am covered.

      Best Regards,
      Ryan

  13. jon says:

    Thanks for info. Does anyone have info about insurance on private label health products

    • Ryan Grant says:

      Hi Jon,

      Unfortunately, I don’t have any specific info about this. I would recommend reaching out to a few insurance agents/companies and let them know what you need, and see where that leads.

      Best Regards,
      Ryan

  14. Jonny says:

    Ryan, you may want to remove Brent’s contact info now too. I tried him today and he said that he has also taken another position at Wells Fargo and cannot assist. He only referenced me to the 800-number for WF (boo!).

  15. Tim says:

    Hi Ryan,

    Any update on who the contact is at Wells Fargo?

    Thanks – Tim

    • Ryan Grant says:

      Hi Tim,

      I have reached out about a week ago to my past contact to figure out who to update this to. I haven’t heard back and will follow up this week to see if I can get this updated.

      Best Regards,
      Ryan

      • Steven C says:

        Any news? Been having an extremely difficult time obtaining coverage. Concerned will get cut off as just finished 4th month over 10K.

        Any help you can provide would be greatly appreciated.

        Steven

        • Ryan Grant says:

          Hey Steven,

          I reached out to a contact there but haven’t heard back yet. I will update the post upon finding a new contact.

          Best Regards,
          Ryan

        • Ryan Grant says:

          Hi Steven,

          I just hear back from a Wells Fargo representative and they recommend calling this number: 1 866 647 6199. They told me that the method to sign up will soon be an online portal, so they didn’t want any specific names mentioned.

          Best Regards,
          Ryan

          • Steven C says:

            Thanks Ryan. Didn’t end up calling WF as my local insurance (home/auto) agent referred me to a commercial insurance broker near me. Took a few days but they ended up securing coverage for me with CNA Insurance @ approx $700 per year.

          • Mikelle says:

            Hey Ryan! I called the number you posted for insurance here and it is for Insureon, who seems like they are somehow related to Wells Fargo. The process was really easy and only took about 30 minutes start to finish. I got liability insurance (no property) for $425/year based on and estimate of $200K in sales. Property insurance would have added about $80 more per year. He emailed me the certificate right away with the language that Amazon requests printed on it. THANK YOU for providing this info and for all the great info you post on your blog!

          • Ryan Grant says:

            Hi Mikelle,

            Glad to hear it helped!

            Best Regards,
            Ryan

        • Sheldon says:

          I had asked my local insurance agent (who does my house and autos) to get me a quote. After about 6 weeks of being led on and getting nervous about being uncovered during the peak season I called the Wells Fargo number above. Took about an hour, but got a policy through CNA Insurance which covers liability exceeding Amazon’s requirements, as well as coverage for office and equipment losses and business disruption and relocation as well as some other aspects that are unique to my company. The policy was described as a business insurance package and was just under $1K annually which seemed reasonable. I have heard of people getting coverage for $300 – $500, but comparing policies is probably apple to oranges as there are many factors: sales, location, industry, types of coverage, etc.

  16. larry says:

    Great topic and something I hadn’t considered even though I have liability insurance for another company I own. I deal with attorneys on a daily basis and they always recommend protecting yourself as best as you can. This includes high liability limits for your business and auto insurance and an umbrella policy. It’s worth the small amount of money it costs for piece of mind and to protect your assets. People are very litigious nowadays.

    • Ryan Grant says:

      Hi Larry,

      Definitely, I believe it’s important to be have insurance to make sure you and your assets are protected.

      Best Regards,
      Ryan

  17. Brian says:

    I’ve been trying to get insurance for what seems to be years – everywhere is a dead end. Talked to Wells Fargo today – dead end. If anyone has any specific contact information for anyone who can insure Amazon sellers please let us know.

Leave a Reply

Your email address will not be published. Required fields are marked *

CONTROL YOUR TIME AND HAVE FREEDOM SELLING ON AMAZON
(I’LL SHOW YOU HOW!)