Amazon sellers, or should we say Amazon, makes an absolute fortune. Total daily sales average at an almost incomprehensible $1.29 billion. And if you’re an Amazon seller, some of that money is yours. When you list yourself as a seller on Amazon, the standard “referral fee” is around 15% of the sale price, but it can range from 8% to 45% depending on the product category.
So, whilst Amazon does take some of the money, a lot of the $1.29 billion in daily sales goes to the sellers. It’s a business within its own right, and a business carries risk.
Does it warrant the need for business insurance? Read on to find out.
How Selling on Amazon Works
Amazon gives sellers two main options. You can sell directly as a third-party merchant or use Fulfilment by Amazon (FBA). As a third-party merchant, you manage the storage, packaging, and shipping yourself. With FBA, Amazon does most of that for you. With that selling model, they will take more money per sale. The benefit is it’s easier – you only have to send your stock to their warehouse and they will fulfill the order.
With both models, you set the prices, manage customer service, and ensure that products are safe and accurately described. The liability is with you if a customer gets injured by your product.
Because you’re responsible for how the product reaches the customer, each selling model comes with different risks. If you fulfil orders yourself, you need to think about issues like damage in storage, improper packaging, or items going missing in transit – all of which can lead to complaints or claims landing at your door.
With FBA, Amazon will handle warehousing and shipping, but you still own the product, set the listing, and choose the suppliers, so you remain the one responsible if something is faulty or unsafe.
A good commercial liability policy can help cover claims arising from defective products, misleading descriptions, or accidents linked to your goods, whether you’re using FBA or fulfilling orders yourself. As your sales grow and more items are out in the world, the chance of something going wrong increases.
The platform has become stricter over the years. Amazon now requires proof of business insurance for many professional sellers, especially those who exceed a set sales threshold.
So, that answers the question, really. Yes, you will need insurance as an Amazon seller.
Does it Classify as a Business?
Yes, it’s a business. You’ll be liable to pay tax and expenses for the products you’re selling, and you’ll be liable if something goes wrong. That liability can include legal claims and compensation if a customer is injured or suffers damage because of something you sold, which is exactly what business insurance is designed to protect against.
So many new sellers underestimate being a business because the process is digital and remote. There’s no shopfront, no staff, no formal office. But the legal and financial implications are the same as any small business. Treating it as merely “a side hustle” is risky – courts and marketplaces will still treat you as a business when something goes wrong, including expecting you to have appropriate insurance in place.
There are multiple definitions, but anytime you engage in business operations with a profit motive, you’re a business. Any time you make sales, you’re a business.
Why Amazon Sellers Might Need Business Insurance
Amazon’s policies are similar to a lot of online marketplaces. But, although we said it earlier, it’s worth defining when Amazon requires its sellers to have business insurance.
Amazon’s policy states that when a seller is making over $10,000 in gross proceeds in a single month, they must have business insurance. Once you cross that threshold, Amazon gives you 30 days to obtain suitable commercial liability insurance and upload proof of coverage, or you risk your account being suspended until you comply. The following conditions must also be met:
- It must be a commercial general liability policy.
- The policy must have at least $1 million in coverage (standard for most commercial general liability policies).
- It must include product liability.
- The policy must list “Amazon.com, Inc., and its affiliates and assignees” as additional insureds.
Without insurance, a claim can spiral into major legal costs and compensation payments and Amazon won’t cover it. And if you’re over the threshold of sales and you don’t prove you have the insurance, they will block you from making sales until they see the evidence of insurance. Even if you don’t meet the $10,000 threshold stated in the Amazon policies, we’d always recommend having business insurance.
Even if the final payout is quite small, the cost of hiring a lawyer and the time spent dealing with the claim could wipe out months of profit. Having the right business insurance means an insurer can handle defence costs and compensation, with your bank balance and your Amazon account both protected.
How to Become an Amazon Seller
Decide whether you want to sell as an individual or a professional. Individual accounts have no monthly fee but have higher per-sale costs. Professional accounts charge a flat monthly rate and have more tools for scaling.
Then decide your fulfillment method. FBA simplifies operations but they take more of a cut of your margins. Fulfilment by Merchant gives you control and flexibility but it’s a lot more effort. Then again, if you’re used to it, you won’t mind.
You’ll then need to register the basic details:
- Business name
- Tax ID
- Bank account
- Product information
Having created your account, you can list products, set pricing, and start selling. You can use this setup phase to build good risk‑management habits that go hand in hand with insurance. Make sure your product descriptions are accurate, keep records of suppliers and batch numbers, save copies of safety certificates or test reports, and log any customer complaints.
If something ever goes wrong, these details make it much easier for an insurer to defend you and for Amazon to see that you’re a responsible seller.
Amazon is one of the best platforms you can sell on. It’s easy, scalable if you want it to be, and has 310 million active users worldwide. Amazon is one of the most go-to online marketplaces for shopping, but just ensure you have the business insurance when you need it!
