You’re selling beauty products on Amazon and your customers start complaining about bad skin reactions. Or you’re getting feedback on phone cases that cause customers’ phones to overheat.
With almost a quarter of ecommerce business failing every year, it’s important to be covered should something go wrong. If you don’t have insurance, your business could get wiped out – no matter how much faith you have in your products.
Below we look at why you need insurance for your Amazon business, and what type is required:
Sole Trader or Limited Company?
Insurance is pretty vital for both Amazon sole traders and limited companies, for different reasons.
For sole traders, your personal assets and liabilities are treated the same as your business assets and liabilities.
So in the worst case scenario, if you’re ordered to pay compensation to a customer you’ll potentially have to pay out of your own pocket if your business can’t cover it, with the added concern that it could impact your personal credit rating. It’s not difficult to see how critical insurance could be in that situation.
For limited companies, you have more protection if something goes wrong, but a claim from an Amazon customer against the company could still lead to it having to be dissolved.
It might surprise you to learn that, whether you are a sole trader or limited company, if you sell on Amazon UK, you don’t need any business insurance. But that doesn’t mean you won’t need it. Just because you don’t have a bricks and mortar store, doesn’t mean that you can’t be held liable by your customers for injury or damage.
Don’t make the mistake of thinking that it’s the manufacturer who’s liable. If you’re importing products from China to sell in your Amazon store – even if you are dropshipping them, you’re treated as the manufacturer and have 100% legal responsibility if anything goes wrong. It’s another scenario that highlights exactly why you need to get the proper cover for your business.
What insurance do I need for my Amazon or Amazon FBA business?
If you’re looking for insurance for your Amazon business, it’s useful to know about the different business insurance types and what they can do for you.
Product Liability Insurance
As an Amazon seller, this type of cover should be top of your list. Product liability insurance covers your business against:
- Claims for damage to property or personal injury, caused by a product you sold, supplied or designed.
Product liability insurance covers:
- Costs of any compensation claims
- Your legal fees
Public Liability Insurance
If you also run a traditional retail business, you’ll need public liability insurance to cover:
- Claims made for injury or damage on your property, for example someone slipping on a wet floor.
- Work you undertake for a client at their home or premises.
Many ecommerce businesses are not public facing businesses and so won’t need public liability insurance. However, it usually comes bundled with product liability insurance when you’re buying business cover.
You should consider minimum cover of at least £1m. It might seem like a large amount, but when you’re dealing with compensation claims it’s better to be safe than sorry.
Additional Insurance Cover for Amazon businesses
On top of product and public liability insurance, you’ll also be offered several additional options. Obviously, not everything on offer will be right for your business, but we’ll run through the main options so you can make an informed choice:
This type of insurance covers you if your stock is damaged or stolen. For most Amazon sellers, this type of cover is a must-have that gives you real peace of mind, especially if you store your stock at home.
Let’s say your stock is damaged by a fire or burst water pipe. Or you suffer a break-in and everything is stolen. Your home insurance won’t pay out for the products you’ve lost, making stock insurance well worth the investment.
Legal Expenses Insurance
Don’t confuse this type of insurance with the legal cover included in your basic business insurance. This is a specific type of business cover if:
- Your business is subject to an investigation by HMRC.
- An employee makes a claim against your business.
You should definitely consider this option if you employ other people in your business.
Employers’ Liability Insurance
If you employ anybody else in your business, then employers’ liability insurance is a legal requirement.
This type of cover will protect your business if an employee is injured ro falls ill because of work you’ve asked them to do.
For example, suppose you employ someone to do the final packing and quality control on your orders before they go to the Amazon fulfilment centre. If they injure themselves and make a claim against you, your insurance will cover any payout.
Business interruption/Income Insurance
Let’s imagine your laptop gets stolen and you’re not able to trade until you get a replacement. Your lost sales and income could be covered by business interruption/income insurance.
If you can envisage a scenario where this would be useful cover for your business, then it could be worth taking out this option.
Who’s the Best Insurance Provider for my Amazon Business?
Some sellers are wary of taking out insurance because they’ve heard it’s too expensive. Or you may have heard stories about how difficult it is to get cover if you’re importing products from China.
In actual fact it’s getting easier all the time to get insurance cover for your online business. Where once you might have had to get a quote from a traditional insurer, there are now plenty of specialists who understand the needs of online business.
Look for a provider who offers dedicated insurance for online sellers, then get multiple quotes to compare and find the best deal for your business.
How Much will my Amazon Business Insurance Cost?
Like any type of insurance cover, how much it costs will depend on a number of factors including:
- Business turnover
- The types of product you sell
- What type of Amazon seller you are
- Where your products are manufactured
- The level of cover you need
- Optional extras
Currently, Amazon sellers with just a few product lines can expect to pay in the region of £30-40 a month.
When you’re choosing the right insurance cover for your business, don’t be tempted to go for the cheapest quote immediately.
Take your time to read the small print and check the level of cover and the excess involved for any claims before making your final decision.
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Do You Need Help with your Amazon Finances?
Insurance is just one aspect of making sure your Amazon business can grow sustainably.
Your Ecommerce Accountant can help you with every aspect of your Amazon business’s finances.
Get in touch today to book a free 30 minute consultation and see how we can help your business.