By securing commercial product liability insurance for your business, you accomplish more than just meeting one of Amazon's requirements for many of its US-based sellers. This coverage also has the potential to support your long-term success as an e-commerce entrepreneur.
In this article, we will equip you with the knowledge necessary to make informed decisions to protect your business from unforeseen expenses resulting from harm caused by a product you sold to a customer on Amazon.com.
Read on as we debunk 11 common misconceptions regarding product liability insurance to pave the way for your continued success as an Amazon seller.
- Typical product liability insurance policies cover all products: Product liability insurance covers product-related claims, but it is important to note that not all products or situations may be covered. High-risk items like children's toys, consumables, or electronics may require additional endorsements or separate policies. Be sure to understand your policy thoroughly and ensure coverage for new high-risk items.
- Only high-volume Amazon sellers should purchase product liability insurance: According to Section 9 of the Amazon Services Business Solutions Agreement, sellers are required to purchase commercial product liability insurance within 30 days after exceeding US$10,000 in gross proceeds in sales in one month on Amazon.com or if otherwise requested by Amazon. Although Amazon only requires certain sellers to purchase this insurance coverage, a product you sell could cause harm even if you only sell a few products a month on average.
- Product liability insurance is very expensive: Although purchasing product liability insurance is an additional expense, it is crucial to compare the monthly premium cost to the potential expenses of a lawsuit. To make it easy for sellers to purchase affordable and compliant product liability insurance, Amazon and Marsh have collaborated to support Amazon’s digital insurance network, the Amazon Insurance Accelerator.
- I can share a product liability insurance policy across multiple Seller Central accounts: Sharing a policy may seem like a reasonable, cost-effective idea, but insurance policies are generally tailored to individual business entities, making sharing a policy a risky and ill-advised recommendation.
- If I don't manufacture the product, I do not need product liability insurance: While manufacturers have liabilities, the individual or business selling a product can be held liable for defective or harmful products, especially if the manufacturer is outside the lawsuit's jurisdiction. A single product liability policy should protect you if you manufacture and sell an end product to a customer. If you have questions, contact one of Marsh's insurance advisors at amazonsellers@marsh.com.
- Seasonal sellers do not need product liability insurance: Even if you only sell during certain seasons—say, Christmas or Halloween—you are still vulnerable to lawsuits year-round based on the products sold during a particular season.
- Customer reviews will protect me from legal action: The belief that positive customer reviews can serve as a legal defense against liability is misguided. Although an important component of a high-performing listing on Amazon.com, reviews do not absolve you of responsibility if your product causes harm.
- Product liability insurance is the same as professional liability insurance: These two coverages sound similar; however, product and professional liability insurance serve very different purposes. The former covers products, while the latter covers services and advice.
- Only physical goods can be covered with a product liability policy: The line between physical and digital products can sometimes become blurred. Some sellers may assume that only tangible, physical goods would be covered, but some product liability policies will extend to digital products like software. Understanding what types of products are covered by your specific policy is essential. An insurance advisor from Marsh can help you know the specifics. Send an email to amazonsellers@marsh.com with your question.
- Insurance companies never pay out: A pervasive myth is that insurance companies will find ways to avoid payouts. While it is crucial to understand your policy's terms, a reputable insurer must adhere to the terms of the policy and honor legitimate claims. If you have questions regarding which policy is right for you and your business, Marsh’s insurance advisors are happy to assist via email at amazonsellers@marsh.com.
- I can wait to purchase product liability coverage until after I face a lawsuit: Unfortunately, procuring insurance after an incident will not protect you retroactively. Insurance needs to be in place before the triggering event to provide coverage.
Conclusion
With a better understanding of product liability insurance, you will be better equipped to navigate the complexities of Amazon’s e-commerce marketplace confidently.
Do you have a question regarding which insurance policy is right for your e-commerce business? Email Marsh today at amazonsellers@marsh.com, or visit the Business Insurance page of Amazon Seller Central to start your quote through the Amazon Insurance Accelerator program.
